The Profile Of Ghana Stock Exchange Market Accounting Essay

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Ghana Stock Exchange was established in July 1989 as a private company limited by guarantee under the Companies Code of 1963 and was later given recognition as an authorized Stock Exchange under the Stock Exchange Act of 1971 (Act 384) in October 1990. The Council of the Exchange was inaugurated on November 12, 1990 and trading commenced on its floor the same day. The stock exchange market changed its status to a public company limited by guarantee in April 1994.

Ghana Stock Exchange market is governed by a Council of nine representing three independent members, two representatives of licensed dealing members, two listed company representatives and two executives. The Council of the Exchange has various committees, which enable it to give special attention to various aspects of the operations of the Exchange. They are the Listing, Finance and Risk Management and Surveillance.

The following are the key roles of the various Committees: Listing Committee considers applications for listing; Finance Committee considers the financial aspects of the Exchange's operations, including budgets and remuneration; Risk Management and Surveillance Committee appraises, and approves applications for membership.

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Ghana Stock Exchange is historically set up to provide the facilities and framework to the public for the purchase and sale of bonds, shares and other securities. Secondly is to control the granting of quotations on the securities market in respect of bonds, shares and other securities of any company, corporation, government, municipality, local authority or other body corporate. Regulating the dealings of members with their clients and other members and coordinating the stock dealing activities of members and facilitate the exchange of information including prices of securities listed for their mutual advantages and for benefit of their clients is yet another reason why it is set up. Finally is to co-operate with association of stockholders and exchange markets in other countries as well as obtaining and making timely and appropriate information that will help their client to make informed financial decisions. In 2004, the exchange was adjudged the world's best performing market with a year return of 144 percent in US dollar terms against Morgan Stanley Capital with 30 percent returns as reported in International Global Index (DataBank Group, 2004). The findings conclude that there are great potential for vibrant capital raising activity for the exchange.

Ghana Stock exchange market council membership includes some of the most distinguished and competent persons in Ghanaian commerce, industry, finance and public service whose tireless effort over the years have raised the exchange market capitalization from little over twenty billion Ghana Cedis (GH¢ 20bn) to almost forty-nine billion Ghana Cedis (GH¢49bn) in 2011. These magnificent market performances now place the exchange market at the third largest capital market in Sub-Saharan Africa, after South Africa and Nigeria. Nevertheless, the operations of the market are timely reviewed and refined overtime.

1.5.1 Regulations

The activities on the stock exchange market are been governed and regulated by the Ghana Stock Exchange Listing Regulations 1990 (LI 1509). In an attempt by the regulation to ensure that internal control mechanisms are put in place by its listed members recommend the formation of Audit sub-committee in all listed companies whose oversight responsibility are to review and evaluate the internal control system; review audited accounts; appoint and remunerate the auditors; review the internal audit procedures and effectiveness and finally the appraisal of the general conduct of the business of the company. The remaining listing regulation are contain in the appendix two.

2 LITERATURE REVIEW

To study the relationship between internal control and company performance on Ghanaian listed company, the researcher has studied and reviewed theories and concepts from several types of resources among them are academic papers, books and research papers that are related to the topic.

2. 1 Theoretical Framework

The study also support most earlier research that the complexity and dramatic expansion in the business activities in recent time could not allow owners to efficiently and effectively manage the whole affairs of their businesses alone hence there is the need to employ a second party (agent) to assist in the operational process of the business activities. The agent in this case now owe the owners (principal) a duty to report on all the contractual activities that he has undertaken on behave of his principal on a regular basis. This contractual relation between the two parties is what is known to be an agency relationship. According to Jensen and Meckling (1976), agency relationship is a contract under which one or more principals engage another person known as agent to perform some task on their behalf, which entails delegating some decision-making authority to the agent. Agency theory hence labeled the owners' as the principal and the managers as the agents. It is worth noting that agent in their attempt to keep up in business therefore may be channeling all their efforts towards expansion and growth, owners might only be interested in maximizing their returns hence causing conflicts between the two parties. Barlie and Means (1932) stated that in order to harmonize the interests of the principal and the agent and as well strengthened their relationship the principal must employ an expert to monitor the agent. This work was supported by Coarse (1937) who states that the contract between the agent and the principal serves as conflict resolution as the principal determines the volume and the nature of the work and the agent only execute the work to the later. He concluded his work by proposing that the principal suffers shirking which deprive them from benefiting from the work delegated to the agent.

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The study now unpinned itself to the theory of contingency to help establish the relationship between the control factors and the company's performance. Contingency theory is a theory in an organizational research that established conceptual terms in an organizational literature (Donaldson, 2001; Sauser, Reilly & Shenhar, 2009). This theory has been a subject of wider research area in the past decades but yet has not been fully developed.(Ayman, Chemers & Fiedler, 1995). According to (Chenhall, 2003; Drazin & Van de Ven, 1985; Reid & Smith, 2000) the early researchers on contingency theory in organization design mainly focuses on the effects of uncertainty on the organizational structure. It was however discovered that recent studies in management accounting and auditing are all based on contingency theory (Abushaiba & Zainuddin, 2012; Reid & Smith, 2000; Sudsomboon & Ussahawanitchakit, 2009; Valanciene & Gimzauskiene, 2009).

Additionally, the relevant of any given factor should be contingent upon other factors (Krishnamoorthy, 2002) but then contingency theory according to Umanath, (2003) facilitates researcher's ability to systematically introduce factors to explain and predict future happenings. This is because it does depend on one's interpretation of the theory, and such theory has the capability of producing accurate hypotheses and consistent functions (Schoonhoven, 1981). Therefore, indicate the possibility of applying contingency framework in the public sectors (Wood, 2009). Mean while a contingency theory also differs with other theories in that establishes relationship between dependent and independent variables in empirical studies (Drazin & Van de Ven, 1985).

The study therefore proposes that company's performance of listed firms in Ghana stock exchange is contingent upon those components of internal controls.

2.3.5 Debt Leverage

Debt leverage measures the ratio of total debt to equity. That is it shows the degree to which a firm is using its borrowed money. Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on their debt; they may also be unable to find new lenders in the future. Leverage is not always bad, however; it can increase the shareholders' return on their investment and make good use of the tax advantages associated with borrowing. The trade-off theory (TO) (Bradley, Jarrell and Kim, 1984; Harris and Raviv, 1991) suggests that every firm has a specific optimal debt-to-equity ratio determined by balancing the present value of expected marginal benefits of leverage against the present value of expected marginal costs of leverage. By this theory, each company borrows in order to gradually move towards its optimal debt-equity ratio, which in turn maximizes its market value (given by the present value of the sum of the expected costs and benefits of debt). Furthermore Jensen (1986) and Zwiebel (1996) support that increased debt can reduce the probability of a firm's takeover by committing managers to a more efficient business strategy. Thus, there is either a negative or positive influence of leverage on firms' performance.

2.3.6 Size of a firm

The size of the firm affects its financial performance in many ways. Large firms can exploit economies of scale and scope and thus being more efficient compared to small firms. In addition, small firms may have less power than large firms; hence they may find it difficult to compete with the large firms particularly in highly competitive markets. On the other hand, as firms become larger, they might suffer from x-inefficiencies, leading to inferior financial performance. Theory, therefore, establishes relationship between size and performance (Majumdar, 1997, p.233).

2.3.7 Management Practice

The adoption of best management practices is a source of competitive advantage, positively related to firms' performance, growth and survival. According to Timmons (1994) entrepreneurs who succeed possess not only an innovative behavior but also solid general management skills. Bird (1995) and Ronstadt (1984) conclude that entrepreneur's management skills were conducive to business performance and growth. Successful firms will be those that have developed a core competence in entrepreneurship where a core competence refers to 'a combination of complementary skills and knowledge bases embedded in a group or team that results in the ability to execute one or more critical processes to a world-class standard (Cayne, Hall and Clifford, 1997).

In summary, it can be observed that most of the studies conducted on the internal control and firm's performance were all done in a regulatory environment where companies are mandated to comply with the internal control disclosure and have supported the fact that there is a relationship between the internal control system and the financial performance of a firm. The little that were done in non-regulatory environment like Ghana only seek to find out the effectiveness of the system by scoring listed firms based on the items described in COSO's model.(Joseph .M, Kuipo and Obeng V). Kajola, Sunday O (2008) used ROE and Profit margin to performance of listed firms in Nigeria. He found out that board size and chief executive status have positive relationship with firm's performance. However, looking at the above studies that have been conducted on the effectiveness of the internal control, this research further seeks to examine the empirical study of internal control on firm's performance by examining control environment, risk assessment, monitoring and reference to international code as measures of internal controls on Ghanaian Stock exchange market since studies are yet to be carried in that regards in Ghana.

4 EMPIRICAL ANALYSIS

4.1 Sample Selection

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The data for the study was obtained from audited financial statements of thirty listed companies on the stock exchange market based on the annual report available between 2000 and 2010. The researcher therefore used purposive sampling technique to select the sample size. Purpose sampling technique was used because the study was targeting companies who have been listed in the Ghana stock exchange for at least ten years since its establishment. And more also this technique ensures that relevant people with useful information for a study are only captured and studied. A total of thirty companies from across all the industries were finally used as sample for the study.

Nine different internal control indexes were examined and place under four different internal control factors recommended by COSO.

4.2 Data Management

The data collected from the sample size was fed into Statistical Package for Social Scientist for easy analysis and interpretation of results. The relationship that exists between the internal control and financial performance of the firms was assessed using correlation. Multiple regressions and ordinary least square (OLS) were also used in the estimation and interpretation of the data.

4.3 Regression

The study adopted the economic model that was in line with most of the studies conducted in the same field and it is stated as:

Y = β0 + βFit + eit

Where Y is the dependent variables used in the study, β0 is constant and β0 is the coefficient of the explanatory variable whereas the eit is the error term. From the above the below equation was evolve for the study.

Performance = β0 + β1CONTENV + β2RISKMGT + β3MONT. + β4CODE + eit

The idea was to determine now the internal control measured by the independent variable have effect on the company's performance.

4.4 Descriptive Statistics

Tables 1 and 2 below show the variables and their descriptions as used in the study

Table 1a: Dependent variable description

Variable

Measurement

REP= Reporting

Reporting variable is set to 1 if firm discloses its internal control in their

LIQ = Liquidity i.e Current Ratio

Current Assets

Current Liabilities

PM = Profit Margin

Net Profit after tax

Turnover

Table 1b: Independent variable description

Variable

Measurements

Control environment

Control environment variable set to 1 if reported in the annual financial statement, 0 otherwise.

Risk management

If the company reports on the risk management activities, one (1) and zero for otherwise

Monitoring

Monitoring variable also set to 2 if there is report on external independent auditor and as well report on the duties of internal audit committee and 0 if otherwise.

International code

Reference to any international internal control code gives the firm one(1) and zero if not

The table 2 below shows the descriptive statistics of all the variables used in this study

Table 2: Descriptive Statistics

REP

LIQ

PM

CONENV

RISKMGT

MONT

CODE

Mean

0.4692

1.4106

0.0469

2.9619

0.5191

1.3402

0.1114

Std. Dev

0.0500

1.1458

2.3371

1.1863

0.5004

0.4745

0.3151

Variance

0.2498

1.3128

5.46224

1.4074

0.2504

0.2251

0.0993

Skewness

0.1234

5.2551

-8.2150

-0.6038

-0.0763

0.6747

2.4696

Kurtosis

1.0152

42.827

104.872

1.7732

1.0058

1.4552

7.0991

Range

1

12.7945

39.76

3

1

1

1

Minimum

0

0.0794

-29.2

1

0

1

0

Maximum

1

12.8739

10.56

4

1

2

1

N Valid

341

341

341

341

341

341

341

Missing

0

0

0

0

0

0

0

The mean of REP of the total sampled firms is about 46%, that of LIQ is 1: 1.4 and the mean of PM is 4.7%. The result clearly shown that on average, out of the total firms listed on the exchange market, the number that report or disclosed their internal control mechanism on their annual financial statement is closed to half of the total population in the market thus 46% of 100%. And that those who disclosed their internal control mechanisms are able to meet their short term financial obligation as and when it falls due hence have their current ratio to be 1:1.4. The average periodic profit earned over the ten years was also GH 4.7.

The result above also shows that out of the four (4) elements measured under the control environment factor (management responsibility, internal audit committee, ethical values and assignment of duties and organizational structure), firms that report their internal control mechanisms, on average also have three out of the four factors which make the study to conclude that the listed firms in the exchange market have control system in place which accounted for their financial performance as seen above. From the above analysis the study conclude that listed firms in Ghana stock exchange market have some level of internal control mechanism installed in their company only that most don't see the need to report them on their financial statement this supported the study undertaken by Joseph at el., 2012 that attested on the existence of internal control system of listed companies in the Ghana stock exchange only that there is more room for improvement in the effectiveness of the internal control system especially in the areas of control activities and monitoring. This makes the study to agree with earlier studies that listed firms in Ghana stock exchange reports on internal controls in their annual financial statement.

The study also identified two (2) monitoring factors namely; reports of existence of internal control by an external independent auditor and implementation of recommendation by auditors in the next year's annual report. The result shown that about 1.3 out of the 2 factors examined was put in place by those who report their internal control system. Again almost 52% of the sample size population has put some measures in place to at least manage the financial risk that might occur in the course of their daily operations. These attest to the fact that most of the listed firms understood the implications of risk on financial performance and hence are ready to fight it. It is rather unfortunate that out of the total firms that have been sampled, only 11% thus three out of thirty listed firms report on their internal control mechanisms in their annual reports with reference to an international internal control code. Though the remaining 35% out of 46% do report on their internal control mechanisms, they do so based on what their management has designed without making any reference to any of the international code standards like reports of COSO, Turnbull, and SOX.

4.3 Regression Analysis

The tables 3a, 3b and 3c below present the correlations among all the variables used in the study. From table 3a using the Pearson correlation, REP is positively correlated with the firm's control environment factors and it is significant (sig 0.0000). Similar results appeared for risk management, monitoring and reference to international code and are all significant. However control environment and risk management have relatively stronger correlation with reporting variable among other independent variables as they have about 52% and 51% respectively and with monitoring factor having the lowest correlation with the reporting variable.

The positive correlation that exist between the dependent variable and the independent variables indicate that firms disclosure policy in annual report will increase when there is adequate internal control mechanism put in place by that firm.

Table 3a: Correlations (Pearson) - REP as firm performance indicator AT significance level of 5%

REP

CONENV

RISKMGT

MONT

CODE

REP

1.0000

0.5214

0.5051

0.1311

0.3767

CONENV

0.5214

1.0000

0.4298

0.1537

0.2553

RISKMGT

0.5051

0.4298

1.0000

0.0841

0.3036

MONT

0.1311

0.1537

0.0841

1.0000

0.1981

CODE

0.3767

0.2553

0.3036

0.1981

1.0000

Sig (1-tailed) REP

-

0.0000

0.0000

0.0154

0.0000

CONENV

0.0000

-

0.0000

0.0044

0.0000

RISKMGT

0.0000

0.0000

-

0.1211

0.0000

MONT

0.0154

0.0044

0.1211

-

0.0002

CODE

0.0000

0.0000

0.0000

0.0002

-

Obs.

341

341

341

341

341

Table 3b: Correlations (Pearson) - LIQ as firm performance indicator AT significance level of 5%

LIQ

CONENV

RISKMGT

MONT

CODE

LIQ

1.0000

0.0837

-0.1130

-0.0479

-0.0888

CONENV

0.0837

1.0000

0.4298

0.1537

0.2553

RISKMGT

-0.1130

0.4298

1.0000

0.0841

0.3036

MONT

-0.0479

0.1537

0.0841

1.0000

0.1981

CODE

-0.0888

0.2553

0.3036

0.1981

1.0000

Sig (1-tailed) LIQ

-

0.1229

0.0371

0.3780

0.1017

CONENV

0.1229

-

0.0000

0.0044

0.0000

RISKMGT

0.0371

0.0000

-

0.1211

0.0000

MONT

0.3780

0.0044

0.1211

-

0.0002

CODE

0.1017

0.0000

0.0000

0.0002

-

Obs.

341

341

341

341

341

Table 3b indicates that though LIQ is positively correlated with control environment, it is not statistically significant (sig 0.1229). However LIQ is negatively correlated with the other three internal control factors but only risk management is significant (sig 0.0371). Though the other two variables are not statistically significant, their negative correlation shows that the absence of internal control mechanism in a firm makes that firm financially vulnerable in meeting its short term financial obligations.

Table 3c: Correlations (Pearson) - PM as firm performance indicator AT significance level of 5%

PM

CONENV

RISKMGT

MONT

CODE

PM

1.0000

0.0155

-0.1508

-0.1248

0.0133

CONENV

0.0155

1.0000

0.4298

0.1537

0.2553

RISKMGT

-0.1508

0.4298

1.0000

0.0841

0.3036

MONT

-0.1248

0.1537

0.0841

1.0000

0.1981

CODE

0.0133

0.2553

0.3036

0.1981

1.0000

Sig (1-tailed) PM

-

0.7756

0.0053

0.0211

0.8069

CONENV

0.7756

-

0.0000

0.0044

0.0000

RISKMGT

0.0053

0.0000

-

0.1211

0.0000

MONT

0.0211

0.0044

0.1211

-

0.0002

CODE

0.8069

0.0000

0.0000

0.0002

-

Obs.

341

341

341

341

341

Table 3c also shows that PM which is the last financial performance indicator of this study is positively correlated with control environment and reference to international code variables but not statistically significant (sig 0.7756 and 0.8069 respectively). It however shows that the profit margin of the firm can only increases when those two factors are installed in a firm. On the other hand risk management and monitoring variables are negatively correlated with firm's profit margin and are all significant (sig 0.0053 and 0.0211 respectively). This negative relationship make the study to agree with the earlier study on the need for listed firms on Ghana stock exchange to do more work on their risk management and monitoring activities so as to enhance their financial performance in the long run.

Table 4a: ANOVA - REP as dependent variable

MODEL

SUM OF SQ

DF

MEAN SQ

F

SIG

1 Regression

37.407

6

6.234

43.82

0.000

Residual

47.520

334

.1423

Total

84.927

340

.2498

Predictors: (Constant), conenv, riskmgt, mont, code

Dependent variable: REP

Table 4b: ANOVA - LIQ as dependent variable

MODEL

SUM OF SQ

DF

MEAN SQ

F

SIG

1 Regression

19.876

6

3.313

2.59

0.018

Residual

426.475

334

1.277

Total

446.351

340

1.313

Predictors: (Constant), conenv, riskmgt, mont, code

Dependent variable: LIQ

Table 4c: ANOVA - PM as dependent variable

MODEL

SUM OF SQ

DF

MEAN SQ

F

SIG

1 Regression

113.917

6

18.986

3.64

0.002

Residual

1743.217

334

5.219

Total

1857.137

340

5.462

Predictors: (Constant), conenv, riskmgt, mont, code

Dependent variable: PM

Tables 4a, 4b and 4c show the analysis of variance (ANOVA) of the variables. With F- values of 43.82 (sig 0.000), 2.59 (0.018) and 3.64 (0.002) for REP, LIQ and PM as financial performance indicators of the study respectively, it clearly shows that there is a strong relationship between the dependent variables (REP, LIQ and PM) and the four independent variables (control environment, risk management, monitoring and reference to international internal control code) at 1%, 5% and 10% statistical significant levels.

Table 5: Coefficient estimates Dependent Variables

Independent Variables

Dependent Variables

REP

LIQ

PM

Conenv

.144

[0.020]*

(0.000)

.174

[0.139]*

(0.003)

.210

[0.118]***

(0.075)

Riskmgt

.297

[.047]*

(0.000)

-0.375

[0.139]*

(0.007)

-0.973

[0.282]*

(0.001)

Mont

.0155

[.046]

(0.733)

-0.113

[0.132]

(0.393)

-0.684

[0.269]**

(0.011)

Code

.3113

[.072]*

(0.000)

-0.276

[0.208]

(0.187)

0.570

[0.424]

(0.180)

Constant

-.166

1.271

0.782

R2

0.4041

0.0426

0.0514

Adjusted R2

0.3970

0.0312

0.0401

F - Statistics (4, 336)

56.95

3.74

4.55

P > F

0.0000

0.0055

0.0014

No of observations

341

341

341

St error are shown in the form [ ], while the p - values are in the form { }

* , **, *** indicate statistical significance at 1%, 5% and 10% respectively.

Table 5 shows the results of the coefficient estimates. The control environment has a coefficient of 0.144. This indicates a positive relationship between it and REP and is statistically significant at 1%, 5% and 10% levels. Similar result is shown for risk management and code. However monitoring variable shows a positive relationship between the REP but is not statistically significant (sig 0.733)

The table further reveals that both control environment and risk management are statistically significant (sig. 0.003 and 0.007 respectively) but control environment is positively related to LIQ while the risk management is negatively related to LIQ. Though monitoring and reference to international code is not significant, they have negative relationship with the LIQ. Again it can be seen clearly that control environment is positively related to PM and is significant (sig 0.075), whiles risk management and monitoring variables are negatively related to PM and are also significant (sig 0.001 and 0.011 respectively).

By analyzing, the descriptive tables and the table 5 above it is clear that the control environment has a positive relationship with the three performance indicators and is significant with all the performance indicators used in the study at 1%, 5% and 10% levels respectively. The result above seem to attest to Whittington and Pany's findings that control environment set tone of the organization even in a non-regulatory internal control environment. DeZoort et all., 2002 defined in his work that control environment which is reflected by the audit committee aims at " protecting the owners' interests by monitoring management's actions, in terms of financial reporting, risk management and internal control". Hence owners' interests can only be protected through accountability and accurate reporting of financial statement. It is therefore clear that control environment is highly related to financial performance and hence our hypothesis one (H1), there is a significant relationship between the control environment and company financial performance on Ghana stock exchange market is accepted.

From the risk management perspective, though it is seen as significant in all the three performance indicators it is only positively related to reporting But the case is different for liquidity and profit margin as it negatively relate to and at a significant level. The negative relationship with liquidity also confirm that when a firms' risk management system is less effective, it increases the current ratio of that firm much higher that it gives an impression that most of the firm's financial resources are idle and could negatively affects the financial performance of that firm. The two implications thereby attest to most of the studies carried out that risk management has positive effects on the financial development of firms (Abdulazzi et al., 2012).

Though the relationship between risk management and profit margin is negatively related, it only attest to the fact that most listed companies in Ghana stock exchange do not report in their annual financial statement their risk management activities due to the stiff competition they faced in the market even though their management might use their experience or traditional method in dealing with most of the risk the business might face. On account of risk management and financial performance, the second hypothesis (H2) there is a relationship between risk management and company performance on Ghana stock exchange market is accepted in the case of reporting and liquidity but rejected in the case of profitability.

COSO's report on monitoring guidance suggests that an effective monitoring system put in place by a company may help improved the internal control system which in turns increases the likelihood of the organization in achieved its set objectives hence increases its financial performance. But our statistically analysis does not support this assertion even though the reporting and liquidity level seems to attest to COSO's report, but they are all not significant (sig 0.733 and 0.393 respectively). Again the profit margin which is significant at 0.011 has a negative relationship with the monitoring which does not support the assertion of COSO that effective monitoring installed seeks to improve financial performance of a firm. And hence most listed firms on the Ghana stock exchange market do not monitor effectively their internal control mechanisms that they have installed in their company hence Our third hypothesis however, H3 = there is a significant relationship between the monitoring and the company performance is rejected.

But this confirm to the study conducted by Joseph at el., 2012 that reveals the weakness in monitoring system put in place by the listed firms in Ghana stock exchange market. On account of reference to the internal code, it is clear that firms that structured their internal control system based on international standard perform financially well than those that do not. The statistically analysis shows a positive relationship between reporting and reference to international code and is significant (sig 0.000) indicating that firms financial performance increases when they employed international internal control code. Though similar interpretation can be deduced from liquidity and profit margin, they are not statistically significant in this study. Hence internal control mechanisms affects financial performance of listed firms in Ghana stock exchange market can be accepted.

5.4 Relationship between Internal Control and Financial Performance

This section answers the last hypothesis and the main objective of the study. The relationship between the internal controls and financial performance of listed companies in the Ghanaian stock exchange market was examined using control environment, risk management, monitoring and reference to international code as indicators of internal control whilst reporting, liquidity and profit margin were common measures of financial performance.

Table 6 Pearson's Correlation analysis at 0.05 significant level.

The correlation table presents the relationship between internal controls measured by control environment, risk management, monitoring and reference to international code as against measures of financial performance. The results show that control environment that set the tone for every organization relates positively to financial performance. However the remaining indicators; risk management, monitoring and code relate positively to reporting but negatively to liquidity and profit margin. This can be attributed to the less factors examined under risk management and monitoring as a result of the information available.

The result in general terms shows that there is a relationship between internal control and firms' financial performance and hence strong internal control must be installed in all the listed companies to enhance performance.

5 CONCLUSIONS AND FUTURE RESEARCH

5.1 Conclusion

There is no doubt that several reaches have been conducted and there are still on - going studies on the examination of the relationship between firms' financial performance and internal control mechanisms in organizations but the results of these studies are mixed.

This study specifically examines the relationship that exist between firm performance, using three financial indicators (REP, LIQ and PM) and four internal control mechanisms (control environment, risk management, monitoring and reference to international code). Sample size of thirty (30) listed firms on Ghana Stock exchange between 2000 and 2010 was used. The study employs multiple regressions and the method of estimation was OLS. However, the study reveals the following outcomes:

There is a positive and significant relationship between control environment (an internal control mechanism) and all the three financial indicators (REP, LIQ and PM) used in the study.

There is also a significant relation between risk management and the three financial indicators only that it relates positively to only reporting whiles it relate negatively to both LIQ and PM

Monitoring factor is negatively related to PM and is statistically significant too but it has no significant relationship with REP and PM

There is positive and significant relationship between code and reporting but it has no statistically significant relationship with LIQ and PM.

Listed firms on Ghana stock exchange markets have their own internal control mechanisms installed in place and hence choses to report on it or not.

5.2 Limitations

As a result of time and resources constraints, it was impossible for the researcher to employed primary data collection techniques where welled worded questionnaires will be developed and administered as well as interviews conducted to the top level management of all the listed companies on the exchange market to ascertain the existence of the internal control mechanisms in their respective outfits. Hence the researcher belies that some companies might have the system in place working more perfectly but failed to report it in their annual statement.

More also though companies in Ghana are not mandated to give annual report on the effectiveness of their internal control system, it is possible that those companies who tries reporting it might not also report appropriately the result of their monitoring which might also affect the outcome of this study.

Finally, people might not read this work hence might not get the benefits of this study. However, the intention of the researcher will be to step out a little higher with this topic through writing of papers and possibly doing presentation in conferences in the near future.

5.3 Future Research

More research should be conducted into the risk management activities and monitoring of internal control system of the listed companies in the stock exchange market and relate it to how it affects their performance. And also future researches should increase the sample size to even study the small and medium scales firms in Ghana. This is because these categories of firms account for close to 75% of the total number of firms in the country.

Again future studies in the same area efforts should be put in place to increase the internal control mechanisms variables recommended by the international code like COSO so as to make the outcome of the study to be more robust.

Acknowledgements

First of all, l will like to that this opportunity to thank all people who made a contribution in my academic life up to this level.

I would like to express my sincere heartfelt gratitude to my supervisor, Prof Yang QingXiang, for her support and encouragement throughout the writing of this thesis. Prof Yang, you indeed restored hope back in me at the time l felt hopeless; a can do spirit that lead me through to the end. Yes no amount of words can express my sincere gratitude for your endless moral and academic support during my research period. May you find favour and luck in all your future endeavors.

I am also greatly indebted to all the lecturers (professors) of school of management, the entire staff and the 2010/2012 academic year international students for making my two years studying in Wuhan worth living.

I take this opportunity also to thank my entire nuclear family back home in Ghana for their care, love and encouragement shown me during my two years of study in China. I am particularly indebted to my Dad; Jacob Kwesi Agboado and my loving sisters Belinda and Lucky for their sound financial support for my stay here in Wuhan. May the good Lord richly reward you in multiple folds.

Last but not least, my warmest regards and blessings go to HUST Bible Study Group members for your prayers and positive contributions made to my life. God bless you all.