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Article
Publication date: 3 December 2018

William Coffie, Ibrahim Bedi and Mohammed Amidu

This paper aims to investigate the effects of audit quality on the cost of capital in Ghana.

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Abstract

Purpose

This paper aims to investigate the effects of audit quality on the cost of capital in Ghana.

Design/methodology/approach

Non-financial firms listed on the Ghana Stock Exchange (GSE) as well as non-listed firms from the database of Ghana Club 100 were included in the sample. Series are yearly, covering a sample of 40 firms during the six-year period, 2008-2013. The study employed the positivist research paradigm to establish the relationship between audit quality and the cost of capital.

Findings

There is evidence to suggest that the cost of debt and the overall cost of capital of firms in Ghana can be explained by the quality of the external auditors. The results also show that the large size of the board is associated with low cost of debt.

Research limitations/implications

The fact that the choice of quality measure is based on firm size only and other measurements of audit quality could not be measured. Future research may examine how other approaches to measuring audit quality affect cost of capital.

Practical implications

The results significant for those charged with assurance and regulation, as well as lenders and managers of companies.

Originality/value

The authors investigate how external auditing quality affects the cost of capital of firms operating in Ghana.

Details

Journal of Financial Reporting and Accounting, vol. 16 no. 4
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 5 February 2018

William Coffie, Francis Aboagye-Otchere and Alhassan Musah

The purpose of this paper is to examine the effect of corporate governance and degree of multinational activities (DMAs) on corporate social responsibility disclosures…

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Abstract

Purpose

The purpose of this paper is to examine the effect of corporate governance and degree of multinational activities (DMAs) on corporate social responsibility disclosures (CSRD) within the context of a developing country.

Design/methodology/approach

Using the annual report of 33 listed firms spanning from 2008 to 2013, the authors employed content analysis based on an adapted index score of CSRD developed by Hackston and Milne (1996) as applied in similar studies (e.g. Deegan et al., 2002; Hassan, 2014). Guided by the authors’ hypotheses, the authors model quantity and quality of CSRD (two separate econometric models) as functions of multinational activity and corporate governance.

Findings

The results show that the DMA has a positive association with both quality and quality of CSRD. The results also show that certain corporate governance characteristics such as board size (quality and quantity) as well as the presence of a social responsibility sub-committee of the board (quality) have a positive relationship with CSRD. However, increasing the number of non-executive directors (NEDs) may not necessarily improve the quantity or quality of disclosure.

Research limitations/implications

The study is limited by theory and geography. Theoretically, the study is based on the legitimacy theory and feels compelled to reiterate the importance of considering alternative theoretical perspective in future research. Again the study is limited geographically as the investigation is based on Ghana only and the authors suggest that future research be extended to other countries.

Practical implications

This study is important as it demonstrates the importance of providing quality of CSRD to stakeholders when the board of a firm has a sub-committee responsible for corporate social responsibility.

Originality/value

The results of the study extend the literature on CSRD by demonstrating a new evidence on how the degree of firm’s multinational activities together with corporate government mechanism affects both quantity and quality of CSRD in the context of unchartered developing country. The results support the theoretical view that companies engage in CSRD in attempt to legitimize their operations based on the pressure exerted on them and the mechanism put in place to respond to those pressures.

Details

Journal of Accounting in Emerging Economies, vol. 8 no. 1
Type: Research Article
ISSN: 2042-1168

Keywords

Article
Publication date: 7 January 2019

Mohammed Amidu, William Coffie and Philomina Acquah

This paper aims to investigate how transfer pricing (TP) and earnings management affect tax avoidance of firms in Ghana.

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Abstract

Purpose

This paper aims to investigate how transfer pricing (TP) and earnings management affect tax avoidance of firms in Ghana.

Design/methodology/approach

The authors use a panel data set from 2008 to 2015 to further shed light on transfer pricing-tax avoidance nexus by examining the complex interaction of three key variables: transfer pricing, earnings management and tax avoidance.

Findings

The results show that almost all the sample firms have engaged in some form of transfer pricing strategies and the manipulation of earnings to avoid tax during 2008-2015. There is evidence to suggest that non-financial multinational corporations manipulate more earnings than the financial firms while financial firms also use more TP than non-financial firms. The overall results suggest that the sensitivity of tax avoidance to transfer pricing decreases as firms increase their earnings management. By extension, these results have important policy implication for policymakers in assessing the effectiveness of tax laws relating to transfer pricing.

Originality/value

The authors investigate how transfer pricing and earnings management affect the avoidance of firms operating in Ghana.

Details

Journal of Financial Crime, vol. 26 no. 1
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 27 September 2019

William Coffie and Ibrahim Bedi

This study aims to investigate the effects of international financial reporting standards (IFRS) adoption and firm size on auditors’ fees determination in the Ghanaian…

Abstract

Purpose

This study aims to investigate the effects of international financial reporting standards (IFRS) adoption and firm size on auditors’ fees determination in the Ghanaian financial industry.

Design/methodology/approach

The authors use the annual report of 52 listed and non-listed firms spanning from 2003 to 2014. Guided by the hypotheses, the authors conditioned audit fees on IFRS adoption and firm size and execute robust fixed effects panel regression.

Findings

The results show that IFRS adoption has a positive coefficient with audit fees suggesting that the adoption of IFRS, indeed, increases the audit fees paid by banks and insurance firms, as well as the industry as a whole. The results are consistent with the idea that IFRS adoption increases auditor efforts with respect to time and complex nature of some aspect of the standards. Again, as expected, the coefficient of size is positively and significantly related to audit fees. This indicates that the size of the auditee plays a vital role in determining audit fees.

Research limitations/implications

The study is limited by industry (i.e. the financial services industry) and geography (i.e. Ghana). The authors propose further research that will widely consider other sectors and countries to improve the current scanty literature in this area. Besides, theoretically, the study is limited to the lending credibility theory and feels compelled to reiterate the importance of considering alternative theoretical perspective(s) in future research.

Practical implications

This study is significant to practitioners as it demonstrates the importance of the determinants of the auditors’ fees. It helps auditors to apply the relevant charging formula when determining audit fees, while it helps managers to improve upon the quality of reporting to control audit bill and forecasting their audit expenditure.

Originality/value

The results of the study extend the literature on the cost side of IFRS adoption by investigating the financial services industry and non-listed firms in a new context, i.e. a developing country where this research is uncharted. The existing studies based their analysis on either cross-section or pooled analysis and shorter post-adoption period (Cameran and Perotti, 2014). However, using an extended post-adoption period data, the authors base the study on analytical panel model, which directly examine the cost side of IFRS adoption with size as joint key explanatory variables with emphasis on financial institutions and external auditors.

Details

Accounting Research Journal, vol. 32 no. 3
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 30 September 2019

Lord Mensah, Divine Allotey, Emmanuel Sarpong-Kumankoma and William Coffie

This paper aims to test whether a debt threshold of public debt has any effect on economic growth in Africa.

Abstract

Purpose

This paper aims to test whether a debt threshold of public debt has any effect on economic growth in Africa.

Design/methodology/approach

The authors applied the panel autoregressive distributed models on 38 African countries with annual data from 1970 to 2015. It was established that the threshold and the trajectory of debt has an impact on economic growth.

Findings

Specifically, the authors found that public debt hampers economic growth when the depth is in the region of 20 to 80 per cent of GDP. Based on debt trajectory, this study established that increasing public debt beyond 50 to 80 per cent of GDP adversely affects economic growth in Africa. The study also finds that the persistent rise in debt also has adverse effect on economic growth in the African countries in the sample. It must be known to policymakers that the threshold of debt in developing countries, and for that matter African countries, are less than that of developed countries.

Practical implications

This study suggests threshold effects between 20 and 50 per cent; this should be a guide for policymakers in the accumulation of debt stock. Interestingly, the findings suggest some debt trajectory effect, which policymakers might consider by increasing efforts to reduce debt levels when they fall between 50 to 80 per cent of GDP. This implies that reducing such debt levels can help African countries increase their economic growth.

Originality/value

The study is unique because it seeks to add new evidence on the relationship between public debt and growth in the African region, by considering the impact of the persistent growth of public debt on economic growth.

Details

International Journal of Development Issues, vol. 19 no. 1
Type: Research Article
ISSN: 1446-8956

Keywords

Book part
Publication date: 4 December 2012

William Coffie and Osita Chukwulobelu

Purpose – The purpose of this chapter is to examine whether or not the Capital Asset Pricing Model (CAPM) reasonably describes the return generating process on the…

Abstract

Purpose – The purpose of this chapter is to examine whether or not the Capital Asset Pricing Model (CAPM) reasonably describes the return generating process on the Ghanaian Stock Exchange using monthly return data of 19 individual companies listed on the Exchange during the period January 2000 to December 2009.

Methodology/approach – We follow a methodology similar to Jensen (1968) time series approach. Parameters are estimated using OLS. This study is designed to measure beta risk across different times by following the time series approach. The betas of the individual securities are estimated using time series data of the excess return version of the CAPM.

Findings – Our test results show that although market beta contributes to the variation in equity returns in Ghana, its contribution is not as significant as predicted by the CAPM, and in some cases very weak. Our results also reject the strictest form of the Sharpe–Lintner CAPM, but we found positive linear relationship between equity risk premium and market beta. Instead, our evidence uphold the Jensen (1968) and Jensen, Black, and Scholes (1972) versions of the CAPM.

Research limitations/implications – This study is limited to the single-factor CAPM. Future studies will extend the test to include both size and BE/ME fundamentals and factors relating to P/E ratio, momentum and liquidity.

Practical implications – Our results will make corporate managers to be cautious when using CAPM as a basis to determine cost of equity for investment appraisal purposes, and fund managers when evaluating asset and portfolio performance.

Originality/value – The CAPM is applied to individual securities instead of portfolios, since the model was developed using information on a single security.

Details

Finance and Development in Africa
Type: Book
ISBN: 978-1-78190-225-7

Keywords

Content available
Book part
Publication date: 4 December 2012

Abstract

Details

Finance and Development in Africa
Type: Book
ISBN: 978-1-78190-225-7

Content available
Book part
Publication date: 4 December 2012

Abstract

Details

Finance and Development in Africa
Type: Book
ISBN: 978-1-78190-225-7

Article
Publication date: 23 May 2020

Kofi Bondzie Afful and William Opoku

Sub-Saharan African (SSA) stock exchanges are imperfect and inefficient. Therefore, orthodox finance theories are unable to completely explain their market returns. Such…

Abstract

Purpose

Sub-Saharan African (SSA) stock exchanges are imperfect and inefficient. Therefore, orthodox finance theories are unable to completely explain their market returns. Such models mainly identify anomalies when applied to the sub-region. Consequently, this paper develops an original theoretical model to better explain market returns on the sub-continent.

Design/methodology/approach

This paper develops an alternate analytical framework that combines adaptive expectations, Keynesian LM model and modified uncovered interest parity (UIP) formulations to address empirical anomalies identified by previous literature when analyzing SSA's inefficient stock markets. Using panel data, the study first computes the fixed as well as random effects regressions and, later, a Generalized Method of Moments (GMM) dynamic panel regression for further empirical analysis.

Findings

Both the fixed and random effects regression results indicate that the relative output-money supply disparity and foreign inflation-money supply growth rate spread have positive effects on market returns in SSA. On the other hand, foreign interest rates have an inverse effect. Although the GMM dynamic panel regression has similar results, it additionally finds that market returns in SSA are autoregressive. This suggests that past returns are persistent.

Research limitations/implications

A key implication is that multipliers and transmission mechanisms in SSA may take longer to adjust, thereby limiting short-run market returns. Also, policymakers must encourage a critical mass of firms to list in order to enhance efficiency. Additionally, policy variables significantly influence returns. One limitation is the high market segmentation in SSA. This heightens heterogeneity, emphasizing fixed effects.

Practical implications

Also, the findings of this study may not apply to all emerging economies as SSA economies are highly heterogeneous.

Social implications

The segmented nature of SSA stock markets may have implications for income inequality and the distribution of resources within the economy. Also, it indicates that there are limits to how firms use capital markets on the sub-continent.

Originality/value

This paper abstracts from the strict ideal market conditions prescribed by modern finance theories and develops an original modified UIP model. It finds that SSA stock markets may be more sensitive to policy variables, instead of determinants postulated by orthodox finance concepts. The study offers opportunities for further critical examination of returns in imperfect frontier markets.

Details

International Journal of Emerging Markets, vol. 16 no. 4
Type: Research Article
ISSN: 1746-8809

Keywords

Open Access
Article
Publication date: 28 February 2022

Carlotta D'Este and Marina Carabelli

This study aims to investigate the relationship between family managers and firms’ risk levels in a context characterized by low investor protection and firm opacity…

1095

Abstract

Purpose

This study aims to investigate the relationship between family managers and firms’ risk levels in a context characterized by low investor protection and firm opacity. Specifically, this paper examines whether the level of risk faced by firms is affected by family shareholders’ ownership stake and activism.

Design/methodology/approach

Corporate governance data were hand-collected for a sample of 90 Italian listed companies and 540 observations from the year 2018. Regression analysis was then used to test the research hypotheses.

Findings

This study provides evidence of a positive association between active family ownership and risk faced by sampled firms. This study also finds that the number of inside directors is negatively correlated with firms’ risk-taking. Overall, the results confirm family managers’ influence on firms’ risk choices and show consistency with theoretical arguments in favor of hiring professional managers to guide family-owned firms.

Practical implications

Practical implications emerge from the study findings. First, family owners should consider to hire a larger number of professional managers to support firms’ wealth maximization and retention and to reduce default risks. Second, investors should take into account the firms’ board of directors and management composition to better assess the investments risk level. Finally, the positive correlation between active family owners and systematic risk suggests the opportunity for regulators to improve the legal requirements related to minority directors to increase their effectiveness and, therefore, minority shareholders’ protection.

Originality/value

This study extends the literature on the association between ownership structure and firms’ risk levels, showing the effect of family managers on firms’ risk levels. Besides, to the best of the authors’ knowledge, no previous study investigates professional executives’ influence on risk when family ownership prevails.

Details

Corporate Governance: The International Journal of Business in Society, vol. 22 no. 6
Type: Research Article
ISSN: 1472-0701

Keywords

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