Interest: I’ve been interested in Ghana since I spent my summer there in 2010. When I learned that they had a stock market, I was intrigued to learn more and this was a good way to explore the connections between economics and politics. The risk of expropriation by large shareholders reflects the dangers of weak regulatory and legal systems, while the relationship between government ownership and firm value showed the ramifications of heavy government involvement in the economy.
The Ghana Stock Exchange lists a large number of companies with highly concentrated ownership, raising questions about the role of ownership structure in determining firm value. The government also continues to maintain large stakes in many firms, leading to concerns about possible distortions related to government involvement in firm management. Using a panel of firms listed on the Ghana Stock Exchange between 2000 and 2010, I measure the effect of differing ownership structures on the value of listed firms. I find strong evidence of the risk of shareholder expropriation, but only limited evidence for the monitoring value of large shareholders. I also find a non-linear relationship between government ownership and firm value. Investors mistrust government interference in company management at moderate levels of investment, but value closer connections to the government at high levels of state ownership.