UNIVERSITY OF PROFESSIONAL

STUDIES ACCRA-UPSA

PROJECT WORK PRESENTATION

ASSESSING THE CORPORATE GOVERNANCE PRACTICES OF DELISTED COMPANIES OF THE GHANA STOCK EXCHANGE (GSE).
A CASE OF UT BANK

by:

– MAAME EFUA OSEI

– KINGSLEY BOAKYE

– ELIZABETH DWAMENA ANTWI

– THEOPHILUS OPAI-ADJEI
 Background to the Project
■ Corporate governance has its roots from the emergence of capitalism and modern stock organizations, the development of
international trade and the enormous growth of multinational corporations during the “industrial revolution” in the early part
of the nineteenth century.

■ The effectiveness of good corporate governance practices of corporate organizations is to entice or attract capital providers
since this will induce them to invest with the hope that they are investing in a credible company that will safeguard their
investments, and in the end reward them appropriately.

■ In Sub-Sahara Africa, with Ghana inclusive, the concept of corporate governance has been increasingly embraced as most
firms employ practices and policies that lead to sustainable growth. .

■ Capital acquisition, through equity, has become a significant lifeblood for most firms that intend to attract investors. In spite
of these great opportunities, these markets have also become a threshold of failure as most firms fail to understand the
dynamics of going public
■ The uproar results of corporate scandals and failures have shown interest in the impact of corporate governance on corporate
performance. The delisting of firms from the GSE in recent times have seen much interest in corporate governance practices
applied in listed companies.
 Problem Statement

■ Ghana Stock Exchange in recent time has seen more companies delisting from its market than rather listing. According to
the GSE website (gse.com.gh), 5 firms between the periods of 2000 and 2016 were delisted as against 5 firms between
2017 and 2019.

■ According to a press release issued by the Ghana Stock Exchange (GSE) on 14th August 2017, UT Bank was indefinitely
suspended of the listing status from the stock exchange after breaching its obligations under the GSE Listing Rules.

■ This breach, as stated, was as a result of the firm failing to publish its financial results since 31st, December 2015. .

■ The firm promised to release the 2015 and 2016 financial statement by the end of 2017’s first quarter but was never
released and that led to the revoking of UT Banks license and its delisting from the GSE.

■ Therefore, the researchers seek to assess the corporate governance practices that led to the delisting of UT Bank from the
GSE.
 Profile of UT Bank
■ Unique Trust Bank (UT Bank) is a medium-sized financial services provider headquartered in Ghana with
subsidiaries in West Africa and Western Europe. In 1997, Joseph Nsonamoa and Prince Kofi Amoabeng co-
founded Unique Trust Financial Services and then renamed it UT Financial Services.

■ In 2008, UT (Unique Trust) Holdings Limited acquired a majority shareholding in a Ghanaian commercial
bank called BPI Bank. The bank was re-branded as UT Bank Ghana Limited and opened for business in May
2009.

■ In June 2010, UT Bank and UT Financial Services Merged into one new company called UT Bank Ghana
Limited

■ The Chairman of the Board is Joseph Nsonamoah and the CEO is Stephen Antwi-Asimeng. As of January
2014, UT Bank maintained a network of Thirty (30) interlinked branches across all regions of Ghana.
 Research Objectives

The primary objective of this study was to assess the corporate governance practices of delisted
companies of GSE and a careful study of UT Bank.
The specific objectives are as follows:
I. Determine the type of influence board size wielded on the performance of UT Bank on the Stock
Exchange.
II. Ascertain the type of influence board composition (independence) wielded on the performance of
UT Bank on the Stock Exchange
III. Determine the type of influence audit committee wielded on the performance of UT Bank on the
Stock Exchange.
 Significance of the Study

■ The study’s findings will serve as an empirical background for researchers on the real issues that lead to
the delisting of public companies from the stock exchange.

■ The results of the study will equip policymakers, shareholders and management personnel with relevant
information on the importance of corporate governance practices on public firms and how to abstain
from practices that result in delisting.
 Research Schedule

■ The team members visited the Ghana Stock Exchange to solicit information on the topic
under study. This was to ensure we had all the necessary information with regards to the
work.

■ The study was a case study which adopted qualitative and quantitative methodology.

■ The team proceeded to gather data for the project by distributing (open-ended)
questionnaires and followed up with an interview when needed.
 Theories Used
■ Concept of Corporate Governance
■ Corporate governance has been defined variously from different perspectives by several authors
and professionals including regulators, professional bodies and academics.

■ According to two schools of thought developed by Gillan (2006) and Stenberg (2004), corporate
governance is viewed under narrow perspective and broad perspective.

■ In the narrow perspective, Gillan and Stenberg views corporate governance as satisfying the
interests of the shareholders while the broad perspective views corporate governance as satisfying
the interest of the stakeholders that is, employees, customers, suppliers and government.

■ Corporate governance under the shareholders perspective is viewed as the principal’s motivation to
maximize their value (ownership share). On the other hand, stakeholder’s perspective describes the
concept in terms of controlling mechanisms to regulate and maintain business operations (Zingales
cited in Marashdeh, 2014).
 Theories Used Con’t
■ Shareholder Model
■ Proposed by Milton Friedman, the shareholder’s model asserts that “there is only one and only
one social responsibility of business – to use its resources and engage in activities designed to
increase its profits so long as it engages in open and free competition, without deception or
fraud.”
■ The model is based on the premise that managements are employed as agent of the
shareholders (principal) to run the corporation for their benefit, as a result, the agents are duty
bound, legally and morally obligated to serve the interest of the shareholders.
■ Maher and Anderson (2000), indicated that due to the separation of ownership and control in
modern corporations, there is often a divergence of interests between the parties involved: the
principal and the agent.
■ Essentially, according to Corplaw (2013), the main issue as far as stakeholder model is
concerned in the modern corporation is that, due to share ownership of the institution,
administrative actions including financial management often depart from those required to
maximize shareholders returns
 Empirical Review
■ Kang and Kim (2012) examined whether corporate governance affects manager's real operating or investment decision to
control reported earnings. The results provide that real activity-based earnings management is influenced by corporate
governance structure. This focus on real activity-based earnings management suggests new avenues for research on
corporate governance. The results offer some insights for policymakers interested in promoting legislation to ensure strong
corporate governance in their nation.

■ An analysis conducted by Kyereboah-Coleman, Adjasi & Abor, (2007) on the impact of corporate governance on
performance of listed companies in Ghana suggests that well-governed firms have been noted to have higher firm
performance. Results revealed a likely optimal board size range where mean ROA levels associated with board size 8 to 11
are higher than overall mean ROA for the sample.

■ In a study entitled: Corporate governance and corporate performance, Brown and Caylor (2004) examined the relationship
between corporate governance and firm performance. Findings discovered that good corporate governance has more control
on the yield of the firm in connection with director’s reward. However, other aspects also have undeviating influence on the
firm’s performance.

■ Thomsen and Pederson (2000) conducted an intensive investigation into ascertaining the relationship between corporate
governance and economic performance of listed companies in Europe using Tobin’s Q as the economic criteria. Findings of
the study revealed that there is a significant positive relationship between corporate governance with concentrated ownership
and economic performance.
 Nature of Problems Identified

1. Board Size: The study determined that a unit increase in the size of board members will lead to a 3.11%
decrease in the performance of the formal UT bank. This result indicates that there is sufficient evident to
suggest that the coefficient of board size is significant and also have a negative influence on the
performance of UT Bank.

2. Board Composition: the study found out that, BComp has a positive and significant impact on the
performance of UT Bank. This assertion is based on the coefficient value of 1.61546 which a significant
value of 0.0582. By implication, a unit increase in the BComp of UT bank will have a positive
corresponding impact of 1.6% impact on the total performance of UT bank

3. audit committee : the study discovered that there is a positive and statistically significant relationship
between the audit committee and firm performance. This implies that if there were to be an effective audit
committee in place in UT Bank there would have been a corresponding 2.8 per cent increase in the
performance of UT Bank.
 Solutions to The Problems
■ Plans to address Non-Performing Loans (NPLs): UT Bank should have submitted plans to
address Non-Performing Loans (NPL) and enforcement of loans write-offs. At an increasing rate,
impaired assets is becoming a key risk in the banking industry. This has heightened most banks’
risk aversion to credit delivery. Researchers believe the best way to reduce their impaired assets is
to remove some of the structural bottlenecks in the credit process.
■ Non-interference of non-executive directors: Non-Executive Directors are not permitted to
engage in the day-to day management of the bank but should be involved in policymaking and
planning exercises. In addition, they are to monitor executive directors and act in the interest of the
company stakeholders. Non-Executive Directors should satisfy themselves on the integrity of
financial information and that are robust and defensible.
■ Adherence of credit management principles and procedures: A good credit management system
minimizes the amount of capital tied up with debtors. The bank should have put in place a well-
structured credit management principle to be followed by its creditors. Also ensuring compliance
with company credit policy and going in for collaterals worthy of the loans will deter creditors from
not paying back loans, this will minimize risk and maximize opportunities.
 Lessons Learnt and Challenges
■ Lessons Learnt
■ Researchers realized that decisions taken by directors of UT Bank deviated from the
shareholders motives and was shown in the firm’s financial statement between 2010 and 2014.
■ After analysing the financial statement, researchers realized that executives failed to make
profit for the firm as a result of directors taken decisions for shareholders without consultation..
■ Researchers also learnt that the performance of an audit committee on a board plays a crucial
role in its effectiveness.
■ Challenges
■ The unavailability of board members to probe on issues that affected the board during its
delisting. Researchers were challenged with finding the right answers from the board of
directors as they were unwilling to participate in the research.
■ The financial statement for 2015 and 2016 were unavailable to help assess financial
performance of the company before its delisting. This created a vacuum as to the actual
activities of the bank and the pertaining flaws that led to its collapse.
 Conclusion and Recommendations

■ Conclusions
The purpose of this study was to assess the corporate governance practices of delisted companies from the Ghana
Stock Exchange. UT Bank’s delisting was used as the study area for this research. It was discovered that there was a
negative relationship between board size and performance of UT bank. The study investigated corporate governance
practices and its impact on the performance of delisted UT Bank from the GSE. It was revealed that board size of an
institution plays a vital role in the performance of that institution based on the revelation made in the analysis.

■ Recommendations
1. The Institute of Directors (IOD) Ghana should be sought to when selecting, assessing, and inducting directors
for listed companies
2. Researchers recommend that board size of listed companies should be, at most, 7 and not be an even number
for a balanced decision making. Two thirds (2/3) of all boards should consist of non-executive directors whiles
the rest are made executive directors.
3. Controls policies should be put in place to reduce risk and to ensure that operations of listed companies are
successful.
Thank You