Corporate Governance Disclosures In Emerging Capital Markets The Case Of Ghana



Firm governance has dominated the protection agenda in developed market economies given that mid 1990s. The spate of firm failures and large authorities bailouts which have characterised the current worldwide recession has led to an upsurge inside the identify for tighter regulation of capital markets and further stringent firm governance. What has develop to be clear from the current worldwide capital markets meltdown is that, as capital markets develop, so too does the complexity of transactions and organisational constructions, and the span of inter-dependencies among the many many quite a few avid gamers obtainable available in the market which lengthen previous the boundaries of nations and continents.

It is essential for the stability of the worldwide monetary system that there is passable and environment friendly regulation of the various capital markets and that the managers of important firms’ be held accountable for complying with these guidelines and adhering to the concepts of advantageous firm governance. To make sure that firm supervisor to be held accountable for his or her compliance with guidelines and good governance, they should make associated disclosures of their firms’ annual experiences.

Firm Governance and Rising Capital Markets

The most recent worldwide financial scandals have generated elevated curiosity in firm governance as a approach of mitigating financial points in creating economies (Tsamenyi et al. 2007, Reed 2002, Ahunwan 2002). These points embody weak and illiquid stock markets, monetary uncertainties, weak approved controls and investor security, and frequent authorities intervention. Creating economies moreover bear from poor firm effectivity and extreme focus of agency possession (Tsamenyi et al. 2007, Ahunwan 2002). They usually bear from state possession of firms, weak approved and judiciary strategies, weak institutions, restricted human property capabilities, and closed/family firms (Mensah 2002, Youthful et al. 2008). Reed (2002) well-known that, globalization, worldwide commerce, and worldwide funding practices identify for the occasion of firm governance in creating nations.

Firm governance is mechanism for guaranteeing firm administration acts within the excellent curiosity of a company’s stakeholders (John & Senbet, 1998). If capital markets in creating economies harking back to Ghana are to develop to be completely established and develop, environment friendly firm governance guidelines should be developed and carried out. Such regulatory constructions mustn’t solely be passable to protect the pursuits of shareholders however moreover to assist in boosting the boldness of potential consumers and completely different stakeholders in firm actions (Cadbury, 1992).

Rising Capital Markets (ECMs) are an integral part of the worldwide capital market. In accordance with the Worldwide Finance Firm (IFC, 1996), EMCs may very well be seen as any market in a creating monetary system that has the potential for progress (IFC, 1996). Such markets compete for funding funds with successfully developed capital markets and subsequently should put in place relevant measures to attract enterprise actions. The adoption of environment friendly firm governance is one such measure. Gompers et al. (2003) assert that, good firm governance will enhance agency valuations and boosts the underside line. Alongside associated strains, Claessens et al. (2002) hold that sound firm governance frameworks revenue firms through elevated entry to financing, lower value of capital, increased effectivity and further helpful treatment of all stakeholders.

Firm transparency and full-disclosure of information are core attributes of the corporate governance mechanism (OECD, 1999) and are considered an particularly important difficulty inside the top quality of firm governance. Further, Beeks and Brown (2006)contend that firms with less complicated firm governance make further informative disclosures. Although firm governance strategies differ all through nations, with the occasion of Codes of Biggest Observe across the globe, there could also be gradual convergence of firm governance practices in the direction of worldwide necessities (Hopt 1997). Ghana is an occasion of an rising monetary system which is increasingly embracing the thought of advantageous firm governance and requiring firms to report on their firm governance practices.

Makes an try being made in Ghana to promote environment friendly firm governance embody the formation of the Institute of Directors in 2001 and the occasion of Nationwide Accounting Necessities. Furthermore, the Ghana Securities and Commerce Price (GSEC) has developed a Firm Governance Code of Biggest Observe in opposition to which firms can benchmark their practices. Totally different regulatory requirements which govern firm conduct embody provisions inside the Companies Code 1963 (Act 179), the Securities Commerce Regulation 1993 (PNDCL 333) and the Membership and Itemizing Guidelines of the Ghana Stock Commerce.

Nevertheless all of the above measures which can be designed to secure good firm governance by public listed firms in Ghana, the ultimate stage of compliance with the requirements is, and has always been, low. A look at by Tsamenyi et al. (2007), which investigated firm governance disclosures by making use of a disclosure index to the 2006 annual experiences of 22 listed firms in Ghana, found that the extent and top quality of firm governance disclosures have been minimal.

Many analysis have been examined on firm governance disclosures primarily based totally on the examination of the content material materials and scope of annual experiences data by establishing firm disclosure indexes (see Meek et al. 1995, Coy and Dixon, 2003).

This look at is frightened with the info disclosed principally inside the annual experiences. Data inside the annual report consists of qualitative and quantitative info. The quantitative info is every financial and non-financial. Moreover, many annual experiences embrace illustrations, diagrams and graphical reveals.


Following from the above dialogue, the overall purpose of this look at is to make solutions designed to boost the extent and top quality of firm governance disclosures by public listed firms in Ghana.

In an effort to acquire this purpose the evaluation has the following targets:

  1. to search out out the current firm governance disclosure requirements of listed firms in Ghana;

  2. to match Ghanaian disclosure requirements with these making use of to UK listed firms;

  3. to take a look at the corporate governance disclosures made by a Ghanaian listed firms of their 2008 annual experiences;

  4. to ascertain the variations (if any) inside the firm governance disclosures made by the listed firms in Ghana studied and the corporate governance disclosure requirements;

  5. to find out the reasons for the failure by listed firms in Ghana to completely modify to the corporate governance disclosure requirements;

  6. to make solutions on how the quantity and top quality of firm governance disclosures by listed firms in Ghana could also be improved.


In an effort to acquire the evaluation targets the following methods have been used.

  1. Literature evaluation: Associated articles in tutorial and professional journals have been reviewed with the intention to arrange the extent to which firm governance disclosure requirements exist and are adhered to in quite a few ECMs. Key phrases harking back to firm governance, disclosures, ECMs, and Ghana enter into databases harking back to Emerald, JSTOR, SSRN, and Google to hunt for associated articles.

  1. Doc look at: Statutory and regulatory paperwork have been examined to find out the prevailing firm governance disclosure requirements in Ghana. In addition to, the annual experiences of a sample of 25 listed firms in Ghana for the yr 2008 have been studied to search out out the extent and top quality of their firm governance disclosures.

  1. Disclosure Index: An organization governance disclosure index has been and utilized to the 2008 annual experiences of 25 listed firms in Ghana. The index is has been constructed to include the essential factor firm governance requirements that apply to listed firms in Ghana.

  1. Semi-structured interviews: Six semi-structured interviews have been carried out with the intention to substantiate the reasons for variations inside the firm governance disclosures made by, and required of, listed firms in Ghana. The interviewees have been two finance executives of listed firms, two senior audit companions from the “Large four” auditing firms and one advisor from each of the Ghana Stock Commerce and the GSEC.


Prior analysis harking back to these of Tsamenyi, et al 2007 and ROSC 2005, which have examined factors of firm governance in ECMs and, particularly, Ghana have revealed that firm governance as a protection and regulatory concern is gaining ground nevertheless the stage of firm governance disclosure is low.

This look at, by establishing the current extent (and top quality) of firm governance disclosures in Ghana, determining deviations from the corporate governance disclosure requirements, and making solutions on how firm governance disclosure practices may be improved, will help to lead to enhancements inside the firm governance disclosures by listed firms in Ghana.

Nonetheless, the look at has a wide range of limitations. These embody the following:

  1. The look at has focused solely on a restricted sample of 25 out of the 36 listed firms on the GSE. As a consequence the consequence might be not advisor of all listed firms (or definitely, completely different firms) in Ghana.

  2. The look at will probably be primarily based totally on one yr’s firm governance disclosures and these might be not advisor of firm governance disclosures made in several years. Evaluation which features a longitudinal look at may be important to exhibit the occasion of firm governance disclosures in Ghana.

  3. The semi-structured interviews have been carried out with a small sample of interviewees and the opinions expressed may be influenced by their non-public ideologies and the extent of their experience with listed firms in Ghana.


This evaluation report has six (6) chapters as follows,

Chapter 1: Introduction: On this chapter the background to the look at is outlined, and its objectives and targets are specified. The evaluation methods used for the look at are outlined and consideration could be given to the contributions and limitations of the evaluation enterprise.

Chapter 2: firm governance requirements in Ghana: This chapter provides background data on the corporate environment in Ghana and models out the corporate governance requirements.

Chapter three: Literature evaluation: This chapter provides a definition of firm governance and examines the importance of, and the concepts underpinning, firm governance. It moreover opinions prior evaluation which has examined firm governance disclosures and further notably, these which have investigated firm governance disclosure in ECMs.

Chapter 4: Methodology. This chapter make clear the occasion and software program of the of disclosure index used to take a look at the quantity and top quality of firm governance disclosures inside the 2008 annual experiences of a sample of listed firms in Ghana. It moreover describes the methodology adopted for the semi-structured interviews carried out with six interviewees from chosen institutions in Ghana. In addition to it explains the means by which the data have been analysed and reported.

Chapter 5: Evaluation findings. The outcomes of the analysis of chosen firms’ annual experiences and the semi-structured interviews are reported and examined inside the mild of the exact literature.

Chapter 6: Conclusions and Recommendations. This chapter provides a fast summary of the evaluation enterprise and its findings. Conclusions are drawn from the evaluation findings and solutions made on strategies throughout which firm governance disclosures by listed firms in Ghana could also be improved.




This chapter provides background data on Ghana, its political and monetary environment and its firm profile. It moreover explains the approved and regulatory framework and the corporate governance requirements which apply to listed firms in Ghana.


Ghana is a Sub-Saharan African nation with an entire land area of about 238,538 sq. kilometres/92,100 sq. miles and a inhabitants in 2007, of 23.5 million (Bureau of African Affairs, 2008). Ghana’s inhabitants is concentrated alongside the coast inside the principal cities (Bureau of African Affairs, 2008). Ethnically, Ghana is break up into smaller groups, each of which has a definite language or dialect, nonetheless, the official language is English, which is a legacy of British colonial rule (Sarpong, 1999).


For larger than century, Ghana was under British colonial rule. She attained independence on 6th March 1957 and have develop into a republic in July 1960. After independence, Ghana alternated between civilian and military rule. After a sequence of coup d’états (Sarpong, 1999), in January 1993, the nation returned to democratic rule under the Nationwide Democratic Congress (NDC). After eight years (in 2001) power switched to the New Patriotic Get collectively (NPP) nevertheless in January 2009, following the election, the NPP handed over power to the NDC.

The monetary system of Ghana is dominated by agriculture, mining and forestry agriculture. Agriculture accounts for about 37.5% of GDP (GOG, 2008), and crucial worldwide change earners for the nation are cocoa, gold and occasional (BBC, 2009). In 2007, the nation’s GDP was $15.2 billion. As on the primary quarter of March 2009, the inflation payment of Ghana was 20.53 % (GOG, 2009). Ghana is a member of United Nations (UN), the British commonwealth, African Union (AU), Worldwide Monetary Fund, African Enchancment Monetary establishment (ADB), the World Monetary establishment Group and the Monetary Group of West African States (ECOWAS).



The Ghana Stock Commerce (GSE) was built-in in July 1989. It was recognised as an authorized Stock Commerce under the Stock Commerce Act of 1971 (Act 384) in October 1990, and shopping for and promoting on the bottom of the Commerce commenced in November the equivalent yr. In April 1994, it grew to develop into a public agency restricted by guarantee (GSE 2009). The change is regulated by the GSE Membership Guidelines L.I. 1510, Itemizing Guidelines L.I 1509 and Shopping for and promoting and Settlement Guidelines, and is organized as a physique firm under the supervision of the Securities Commerce Price that falls under the Ministry of Finance.

The Commerce is dominated by a council which includes illustration from licensed dealing members, listed firms, banks, insurance coverage protection firms, and most people. The options of the Council embody stopping fraud and malpractice, sustaining good order amongst members, regulating stock market enterprise and granting listings. The GSE at current has 36 listed firms with a market capitalization as at 31 March 2009, of GH¢18,041.20m, equal to US$13,073.33m (GSE 2009). The manufacturing and banking sectors at current dominate the Commerce, whereas completely different listed firms fall into the insurance, mining, transport, meals, publication, prescription drugs and petroleum sectors.

Lots of the listed firms on the GSE are Ghanaian (three being listed family-controlled firms) nevertheless there are 5 multinationals. Until 2006, explicit individual worldwide consumers, who’ve been first allowed to participate on the Commerce in 1993, weren’t permitted, with out approval, to hold larger than 10% of a listed agency’s’ shares and the general worldwide investments in any agency could not exceed 74% of the company’s shares. These limits have been eradicated by the Abroad Commerce Act of 2006 (Act 723) and non-resident consumers can now make investments obtainable available in the market with out prohibit or prior change administration approval. Dividend income is taxed at eight%, whereas Capital optimistic features on listed securities are exempt from tax until November 2010 (GES 2009).


Over the most recent years, notions of firm governance has been gaining roots in Ghana in response to initiatives by some stakeholders such as a result of the Ghana Institute of Directors (IoD-Ghana), Private Enterprise Foundation (PEF), State Enterprises Price, the Institute of Monetary Affairs, and the Ghana Centre for Democratic Enchancment (Ocran 2001; Mensah et. al 2002). The IoD-Ghana strives to boost firm governance practices and strengthen firms’ boards of directors. It has, for example, hosted worldwide and nationwide conferences, run competitions to increase consciousness of firm governance factors and developed manuals and procedures to help implement good firm governance practices (Mensah et. al 2002).

Nevertheless the above developments, formal firm governance constructions and institutions often will not be widespread although a wide range of authorized pointers current for governance constructions for firms in Ghana. These authorized pointers embody: The Ghana Companies Code 1963 (Act 179), The Securities Commerce Regulation, 1993 (PNDCL 333) as amended by the Securities Commerce (Modification) Act 2000, (Act 590), and the Itemizing Guidelines of the Ghana Stock Commerce, 1990 (L.I. 1509) (Okay-Coleman and Biekpe 2008)


The Companies Code 1963 (Act 179), which depends significantly on the UK’s Companies Act 1948, provides for governance mechanisms of all firms built-in in Ghana (NEPAD 2005). It provides governance of ministration harking back to requirements to have directors, appointment and eradicating of directors, remuneration of directors, directors’ experiences, and audited financial statements. It moreover provides for quite a few mechanisms for shareholders to implement their rights, harking back to rights to annual primary meeting, equal therapies of shareholders.

The Securities Commerce Regulation 1993 (PNDCL 333), as amended by the Securities Commerce (Modification) Act 2000 (Act 590) and Commerce Price Guidelines (2003), provides for, amongst completely different points, the governance mechanism of all stock exchanges, funding advisors, securities sellers, factors concerning accounts and audits and collective funding schemes licensed under the Securities and Commerce Price (SEC 2003). The Securities and Commerce Price, overseeing the disclosure of cloth data to the investing public by firms, along with securities listed on the Ghana Stock Commerce.

Regulatory Frameworks for Boards of Directors

The Companies Code describes directors as one that’s appointed to direct and administer the enterprise of the company, and stipulates that each agency ought to appoint a minimal of two directors for a company. Nonetheless, the Code permits firms to restore the utmost number of directors of their Guidelines. Half 181 of the Companies Code provides that directors are to be appointed through the individual votes of shareholders at a primary meeting of the company. Nonetheless, this steadily implies that the directors are approved by the controlling shareholders. There is no such thing as a such factor as a requirement under the Companies Code for the appointment of unbiased directors nevertheless that’s required under the Securities and Commerce Price’s Code of Biggest Practices on Firm Governance (SEC Code) for the GSE.

Inside the prepare of their duties, the directors are required to behave all the time in what they think about to be the right pursuits of the company as a complete with a purpose to defend its property, extra its enterprise, promote the wants for which it was common, and to take motion in such methodology as a reliable, diligent, cautious, and ordinarily knowledgeable director would act inside the circumstances.

The Code makes provision for the appointment of presidency directors by allowing directors to hold another office or place of income inside the agency, apart from office of auditor. The directors’ remuneration is to be reasonably related to the price of suppliers supplied and is to and shall be selected event by odd resolutions of the company

The Companies Code enjoins directors to, as a minimum as quickly as yearly (at intervals of not more than 15 months), to rearrange and ship to each shareholder the directors’ report, which current the state of the company’s affairs with any change in the midst of the financial yr inside the nature of the enterprise of the company. The report is permitted by the board of directors and signed on behave of the two directors.