Ownership Structure and Performance of Unlisted Firms in Ghana

Abstract

Major organizational decisions that greatly influence enterprise performance have the core mandate from the nature of ownership, which require constant empirical evaluation. The main purpose of the study was to examine the relationship between ownership variables and financial performance of unlisted enterprises in Ghana using the 2013 World Bank Enterprise Survey panel dataset which have two time period and 720 enterprises. The study used the quantitative research approach. Five different ownership variables were used along with profitability per employee as proxy enterprise financial performance for the analysis. Comparison of means based on ANOVA and static panel regression models were used for the analyses. The results suggested that differences in financial performance of enterprises can be explained by ownership structure of an enterprise. Specifically, ownership concentration had negative but increasing effects on profitability per employee of enterprises. The analysis revealed that unlisted enterprises with traded or non-traded shares outperformed the partnership enterprises, but had identical performance with the sole proprietors in terms of profit per employee in the manufacturing sector. Foreign ownership was found to impact directly on profitability in the service sector but not in the manufacturing sector of Ghana. Formal status was also found to be beneficiary in the manufacturing enterprises than service enterprises. The study recommends that owners of enterprises in the manufacturing sector must open up to foreign direct investment by reducing inside concentration. Management of enterprises in the service sector must go formal in order to reap the benefits of formality.