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The Stock Market and the Financing of Corporate Growth in Africa

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  • Charles Amo Yartey
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    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.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/201.

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    Length: 44
    Date of creation: 01 Sep 2006
    Date of revision:
    Handle: RePEc:imf:imfwpa:06/201

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    Related research

    Keywords: Stock markets; stock market; stock exchange; capital structure; external equity; equity ratio; capital market; international finance corporation; international finance; equity finance; financial system; stock market development; equity financing; stock market capitalization; bonds; capital markets; financial markets; corporate assets; financial economics; financial systems; equity ? ratio; inflation rate; financial sector; present value; stock transactions; capital employed; cash flow; domestic capital; domestic capital markets; financial stability; cost of capital; financial liberalization; net present value; stockholders; international financial architecture; international financial markets; capital market imperfection; equity markets; subsidiaries; capital market imperfections; financial intermediation; short term debt; financial institutions; world credit rationing; financial structures; equity market; financial reform; capital markets development; cash flows; free cash flow; financial structure; capital flows; share capital; short ? term ? debt; financial market; stockholder; government securities;

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    References

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    1. 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.
    2. Greenwald, Bruce C & Stiglitz, Joseph E, 1993. "Financial Market Imperfections and Business Cycles," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(1), pages 77-114, February.
    3. 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.
    4. Harris, Milton & Raviv, Artur, 1991. " The Theory of Capital Structure," Journal of Finance, American Finance Association, American Finance Association, vol. 46(1), pages 297-355, March.
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    Cited by:
    1. Honohan, P. & Beck, T.H.L., 2007. "Making finance work for Africa," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-3125420, Tilburg University.

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