Explaining Interest Rate Spreads in Ghana*

Abstract: The question of the optimal spread between bank lending rates and rates that banks pay on deposits, which is fair to bankers, depositors and borrowers, has dogged economies for some time. In Ghana, there is widespread perception that the spread is too wide. Bankers, on the other hand justify the spread on the basis of economic variables that affect them. This paper contributes to the literature by identifying, in the case of Ghana, the short‐run response of the net interest margin of banks to changes in bank‐specific, industry‐specific and macroeconomic variables within the broad framework of Ho and Saunders (1981) . We find that increases in the following factors significantly increase net interest margin — bank market power (or concentration), bank size, staff costs, administrative costs, extent of bank risk aversion and the rate of inflation. On the other hand, increases in the following variables decrease net interest margin significantly — bank excess cash reserves, the central bank lending rate, management efficiency and the passage of time. To help reduce interest rate margins, we recommend that banks should not get too big, the central bank should consider lowering the capital adequacy ratio and banks should be required to pass on to borrowers the full extent of reductions or increases in the central bank lending rate. Continued efforts at keeping inflation at bay will also help.     

Risk Management in Small- and Medium-Sized Businesses and How Accountants Contribute*

We investigate how owners of small- and medium-sized enterprises (SMEs) perceive, make sense of, and practice risk management. Drawing on Schatzki's practice theory, we theorize on how and why risk management happens in SMEs. Thus, we fill a gap in the extant literature, which focuses almost exclusively on risk management within large organizations. We interview entrepreneurs and conduct site observations to gain insight into their risk management activities, the drivers that lead to the adoption of said activities, their attitudes toward risk management, and how their accountants may shape and contribute to risk management in SMEs. We find that rather than a specific set of formal processes, entrepreneurs view risk management as a mindset that emphasizes the preservation of key assets, creation of competitive advantages, and development of local talent and expertise. We observe practices that are mainly informal yet planned, deliberate, and fully integrated within the fabric of organizations that align with ideal forms of risk management. We also find that full-time, in-house accountants do help entrepreneurs with risk management, while external accountants, whose main activities relate to financial statement preparation and tax filings, do not systematically help entrepreneurs manage risk. We contribute to both the theory and practice of risk management by sharing empirical insights into how SME owners perceive, make sense of, and manage risk.     

网络社交场景中金融活动的风险治理

网络社交金融沿着社会分工带来的职能资本裂变而不断发展,为社会成员实现自身需求提供了更广阔的选择空间和判断标准,对社会生产方式和生产关系调整产生了重要影响。网络社交金融的发展特性,与网络社交成员的关系协调、社群权利规则的生成环境和演进机制一起,对金融运行和风险管理产生作用。网络社交场景中金融交易的金融本质尚未发生变化,也未创设出新的金融功能,但网络社交金融活动场景的多样性和跨界融合,以及社交关系的复杂蕴含着金融风险。以生产方式和生产关系调整为中心的探讨,可以丰富网络社交金融的内涵与外延,为网络社交金融风险治理提供适配国情的政策启示。     

Welfare Economics,Political Economy and Policy Reform in Ghana*

Abstract: Economic policy reform touches upon two aspects of the subject of economics - welfare economics and political economy. The former develops the logic of how the gains of the gainers and the losses of the losers should be weighed against each other, in the context of particular ethical frameworks; the latter analyses how the gains of the gainers and the losses of the losers will be weighed against each other, in the context of the institutions of a particular socio-political system. This essay has considered the sub-disciplines of Welfare Economics and Political Economy as two frameworks for evaluating policy reform and applied them to the case of Ghana. It is argued that the agenda for policy makers in Ghana is to work towards organizing and mobilizing the gainers from reforms which advance social welfare, so that resistance to such reforms from the losers can be overcome. The first decade of reform in Ghana presents the results of such alignment. The second decade of reform now awaits. Résumé: La réforme structurelle de l'économie participe de deux aspects de la doctrine économique: l'économie de bien-être et l'économie politique. La première situe dans un cadre logique les modalités par lesquelles les pertes des perdants et les gains des gagnants devraient être mis en balance, dans le contexte d'un système éthique particulier; la seconde analyse les modalités par lesquelles les gains des gagnants et les pertes des perdants seront mis en balance, dans le contexte des institutions d'un système socio-politique donné. Le présent essai utilise les deux sous-disciplines -économie de bien-être et économie politique-comme cadres d'analyse pour l'évaluation des réformes structurelles, en les appliquant au cas du Ghana. L'auteur soutient que pour les décideurs du Ghana, le mot d'ordre consiste à organiser et mobiliser les bénéficiaires des réformes concourant à la promotion du bien-être social, afin de pouvoir vaincre la résistance que les perdants opposent à ces réformes. La première décennie des réformes au Ghana fait apparaître les résultats de cet alignement. La deuxième décennie est ouverte.     

社保基量投资组合选择和风险防范

对比我国社保基金试点中石化与正式入市运营的不同投资风格,发现社保基金的保值、增值必须严格遵循安全性与分散化投资两大原则;分析同时表明,社保基金投资组合选择有向消极型投资策略发展的趋势.有关管理部门除了要对社保基金投资组合做事前谨慎选择外,更须对社保基金投资活动做好事前、事后的风险防范工作.为此,建立风险预警指标体系并强制推行证券投资保险,是有效规避社保基金投资活动中各类潜在风险之关键.     

Capturing Ambiguities: Communal Conflict Management Alternative in Ghana

The primary purpose of this paper is to propose an alternative land conflict management method for rural Ghana. The paper adopts the country's legislative and judicial decentralization programs as a framework for integrating aspects of the existing conflict management methods and skills of the national government and the country's ethnic groups. The paper argues that the continuing outbursts and protraction of land conflicts, particularly conflicts between host communities and migrant-farming groups, in Ghana demonstrate increasing ambiguities in the determination of land rights and the ineffectiveness of the existing land conflict management methods in the country.     

Social Networks Analysis in Accounting and Finance*

Social network analysis (SNA) examines whether interactions between individuals, teams, and organizations result in network structures and patterns that can explain important outcomes, including firm performance, management reporting behaviors, investor beliefs, and audit outcomes. This paper reviews the growing body of work on SNA in accounting and finance research, focusing on 162 articles published between 2000 and 2021, and offers a roadmap that may help move this literature forward. Our survey summarizes the elements of SNA, organizes this literature within a theoretical framework, and provides a thematic discussion of the context and contribution of the selected studies. We also discuss opportunities and challenges for future research. Finally, we include an empirical illustration of the key concepts and tools of SNA. We believe that SNA will continue to offer an interesting avenue for conducting high-impact and cross-disciplinary research in accounting and finance.     

Managing Future Oil Revenues in Ghana: An Assessment of Alternative Allocation Options*

Abstract: Contemporary policy debates on the macroeconomics of resource booms often concentrate on the short‐run Dutch disease effects of public expenditure, ignoring the possible long‐term effects of alternative revenue‐allocation options and the supply‐side impact of royalty‐financed public investments. In a simple model applied here, the government decides the level and timing of resource‐rent spending. This model also considers productivity spillovers over time, which may exhibit a sector bias toward domestic production or exports. A dynamic computable general equilibrium (DCGE) model is used to simulate the effect of temporary oil revenue inflows to Ghana. The simulations show that beyond the short‐run Dutch disease effects, the relationship between windfall profits, growth, and households’ welfare is less straightforward than what the simple model of the ‘resource curse’ suggests. The DCGE model results suggest that designing a rule that allocates oil revenues to both productivity‐enhancing investments and an oil fund is crucial to achieving shared growth and macroeconomic stability.     

Social networks,rice value chain participation and market performance of smallholder farmers in Ghana

This paper examines the impact of rice value chain participation and social networks on smallholder farmers' market performance outcomes (paddy price, quantity of paddy traded, and net returns), using data from a recent survey of 458 smallholder rice farmers in northern Ghana. We employed a treatment effects model to account for potential selection bias associated with observable and unobservable factors. The empirical results reveal that smallholder farmers' participation in a rice value chain is associated with increased paddy price, quantity traded, and net returns. We also find that value chain participation decisions and market performance are positively and significantly influenced by social networks. The empirical results also suggest that sex, farm size, mobile phone ownership, and access to credit significantly increase paddy prices, quantity traded, and net returns of smallholder rice farmers in the value chain.     

Accounting Choices and Risk Management: SFAS No. 115 and U.S. Bank Holding Companies*

This paper provides evidence that regulatory contracts affect firms' accounting choices and risk‐management decisions. Specifically, we investigate whether an exogenous shock to regulatory risk induced by Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities” (SFAS 1993), encouraged U.S. banks to deviate from portfolio and risk benchmarks when they adopted the standard. Because we cannot observe relevant benchmarks, we model portfolio and risk decisions as functions of macroeconomic and firm‐specific factors using data from a period when regulatory capital was immune to SFAS No. 115 accounting. We examine a sample of 230 publicly traded banks and find that (1) irrespective of adoption timing, banks classified too few securities available for sale (AFS) relative to estimated benchmarks; (2) weaker banks that adopted the standard early classified far more securities as AFS relative to benchmarks; (3) banks altered the size of their securities portfolios along with the levels of interest‐rate risk and credit risk as regulatory capital decreased; and (4) the level of interest‐rate risk on banks' loan portfolios increased at the time of SFAS No. 115 adoption. We also explore the 1995 Financial Accounting Standards Board (FASB) amnesty when firms could “readopt” SFAS No. 115. We find that banks used the 1995 FASB amnesty to undo strategic initial SFAS No. 115 adoption decisions. Taken together, our findings suggest that SFAS No. 115 caused some of the accounting and economic consequences predicted by bankers, analysts, and academics.     

Common Institutional Ownership and Earnings Management*

This study examines the relation between earnings management and block ownership of same‐industry peer firms by a common set of institutional investors (common institutional ownership). This relation is important given the tremendous growth of common institutional ownership and the significant influence of blockholders on financial reporting. We hypothesize that common institutional ownership mitigates earnings management by enhancing institutions' monitoring efficiency and by encouraging institutions to internalize the negative externality of a firm's earnings management on peer firms' investments. Consistent with our hypothesis, we find that higher common institutional ownership is related to less earnings management. Analyses of a quasi‐natural experiment based on financial institution mergers show that this negative relation is unlikely to be driven by the endogeneity of common institutional ownership. Cross‐sectional tests provide evidence that the negative relation is stronger among firms for which common institutional ownership is likely to generate a greater reduction in institutions' information acquisition and processing costs, and among firms whose severe financial misstatements are more likely to distort co‐owned peer firms' investments, supporting both mechanisms underlying our hypothesis. Our findings inform the ongoing debate on the costs and benefits of common institutional ownership by highlighting an important benefit: the enhanced monitoring of financial reporting.     

Management Ownership and Audit Firm Size*

The finance literature identifies two agency problems between managers and outside shareholders. First, there is a divergence‐of‐interests problem as management ownership falls. Second, there is an offsetting entrenchment problem when management ownership increases within intermediate regions of ownership. Agency problems are mitigated through contracting, but contracts are often based on accounting numbers prepared by management. Because accounting numbers must be reliable for contracts to be enforced, agency theory predicts a demand for higher‐quality auditors when agency problems are more severe. However, extant studies find no significant or robust relation between management ownership and audit firm size. In contrast to extant research, this study samples unlisted companies rather than listed companies for two reasons. First, the monitoring value of auditing may be higher in unlisted companies because they are less vulnerable to takeover and they are required to disclose much less nonaccounting information to shareholders. Second, unlisted companies have greater variation in management ownership, which permits more powerful tests of the demand for auditing as ownership varies between 0 percent and 100 percent. Consistent with a divergence‐of‐interests effect, the association between management ownership and audit firm size is found to be significantly negative within low and high regions of management ownership. The association is flatter and slightly positive within intermediate regions of management ownership, suggesting the existence of an opposite entrenchment effect. The negative association and the nonlinearity is consistent with the finance literature and with the predictions of agency theory.