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The Stock Market and the Financing of Corporate Growth in Africa: The Case of Ghana

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  • Charles Amo Yartey

Abstract

This paper examines the corporate financing pattern in Ghana. In particular, it investigates whether Singh's theoretically anomalous findings that developing country firms make considerably more use of external finance and new equity issues than developed country firms to finance asset growth hold in the case of Ghana. Replicating Singh's methodology, our results show that compared with corporations in advanced countries, the average listed Ghanaian firm finances its growth of total assets mainly from short-term debt. The stock market, however, is the most important source of long-term finance for listed Ghanaian firms. Overall, the evidence in this paper suggests that the stock market is a surprisingly important source of finance for funding corporate growth and that stock market development in Ghana has been important.

Suggested Citation

  • Charles Amo Yartey, 2006. "The Stock Market and the Financing of Corporate Growth in Africa: The Case of Ghana," IMF Working Papers 2006/201, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2006/201
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    References listed on IDEAS

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    1. Harris, Milton & Raviv, Artur, 1991. "The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
    2. Agarwal, Sumit & Mohtadi, Hamid, 2004. "Financial markets and the financing choice of firms: Evidence from developing countries," Global Finance Journal, Elsevier, vol. 15(1), pages 57-70.
    3. Bruce C. Greenwald & Joseph E. Stiglitz, 1993. "Financial Market Imperfections and Business Cycles," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(1), pages 77-114.
    4. Beck, Thorsten & Asl Demirguc-Kunt & Maksimovic, Vojislav, 2002. "Financing patterns around the world : the role of institutions," Policy Research Working Paper Series 2905, The World Bank.
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    Cited by:

    1. International Monetary Fund, 2008. "Ghana: Selected Issues," IMF Staff Country Reports 2008/332, International Monetary Fund.
    2. Bamidele M. Ilo, 2015. "The Projected Utilization of Initial Public Offer (IPO) Proceeds in Nigeria," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 11(4), pages 72-85, August.
    3. Mirakhor, Abbas, 2007. "Islamic Finance and Globalization: A Convergence?," MPRA Paper 56026, University Library of Munich, Germany.
    4. Patrick Honohan & Thorsten Beck, 2007. "Making Finance Work for Africa," World Bank Publications - Books, The World Bank Group, number 6626.

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