Exploring Bankruptcy and Financial Fraud of Listed Non-financial Firms on the Ghana Stock Exchange in Ghana Banks Lending Decision
AUTHORS
Hayford K. Annor,Accra, Ghana
Francis Pol C. Lim,Accra, Ghana
ABSTRACT
This quantitative study combined the Altman z, Zmijewski x and Beneish m models targeted at the 2009 to 2016 secondary data of the twenty-six listed non-financial firms on the Ghana Stock Exchange to explore warning signals of bankruptcy and fraud reporting. The rationale was to enable Ghana bank managers reduce the risks in the lending decision process in the hype of the 2017/18 Ghana banking crisis that led to collapse of seven banks over this period. Both the z and x models bankruptcy predictions provided statistically significant results when moderated with the m fraud model. The study rejects the null hypothesis that there is no statistically significant relationship between the Altman z and Beneish m scores prediction of bankruptcy and fraud events on the listed non-financial firms on the GSE. Also, the study rejects the null hypothesis that there is no statistically significant relationship between the Zmijewski x and Beneish m scores prediction of bankruptcy and fraud events on the listed non-financial firms on the GSE. In addition, the study rejects the null hypothesis that, there is no statistically significant contradiction between the Altman and Zmijewski models moderated prediction of bankruptcy events on the listed non-financial firms on the GSE. The contradiction in the bankruptcy results had a strictly distress prediction focus for the Altman model and vice versa for the Zmijewski model.
KEYWORDS
Banking crisis, Bankruptcy, Fraud, Ghana, Listed firms, Models, Secondary data
REFERENCES
[1] BoG. “Banking sector report - November 2018,” (2018) Retrieved from https://www.bog.gov.gh/privatecontent/MPC_Press_Releases/Banking%20Sector%20Report-November%202018.pdf
[2] BoG. Bank of Ghana press release: Update on banking sector reforms. (2019) Retrieved from https://www.bog.gov.gh/privatecontent/Public_Notices/Press%20Release%20-%20Update%20on%20Banking%20Sector%20Reforms.pdf
[3] Republic of Ghana. “The budget statement and economic policy of the government of Ghana for 2019 financial year.,” (2018) Retrieved from https://www.mofep.gov.gh/sites/default/files/news/2019-Budget-Statement-and -Economic-Policy_.pdf
[4] BoG. “Bank of Ghana: Banking sector summary,” (2017) Retrieved from https://www.bog.gov.gh/privatecontent/MPC_Press_Releases/Banking%20Sector%20Summary%20-%20January%202017.pdf
[5] Manu, F. “Performance of Ghana stock exchange and economic growth,” Undergraduate thesis. Ashesi University, (2017) Retrieved from https://air.ashesi.edu.gh/bitstream/handle/20.500.11988/322/Manu_Freda_2017_BA_Thesis.pdf?sequence=1&isAllowed=y
[6] Aida, K. “Using a naive Bayesian classifier methodology for loan risk assessment: Evidence from a Tunisian commercial bank,” Journal of Economics, Finance and Administrative Science, vol.22, no.42, pp.3-24, (2017)
[7] Ofori, E. “Detecting corporate financial fraud using the modified Altman z-score and beneish m-score: The case of Enron,” Research Journal of Finance and Accounting, vol.7, no.4, pp.59-65, (2016)
[8] Gvozdanovic, I., and Ofori, E. “Exploring the financial performance of listed companies on the Ghana stock exchange and Johannesburg stock exchange using the Altman z-score model,” International Journal of Economics, Management & Commerce, vol.10, pp.403-416, (2017)
[9] GIABA, “Anti-money laundering and counter-terrorist financing measures: Ghana, second mutual evaluation report,” giaba, dakar. (2018) Retrieved from http://www.fatf-gafi.org/media/fatf/documents/reports/mer-fsrb/GIABA-Ghana-MER-2018.pdf
[10] Chadha, P. “Exploring the financial performance of the listed companies in kuwait stock exchange using the Altman’s z-score model,” International Journal of Economics & Management Sciences, vol.5, no.341, pp.1-18, (2016
[11] Amoa-Gyarteng, K. “Analyzing a listed firm in Ghana for early warning signs of bankruptcy and financial statement fraud: An empirical investigation of anglogold ashanti,” European Journal of Business & Management, vol.6, no.5, pp.10-17, (2014)
[12] Mahama, M. “Detecting corporate fraud and financial distress using Altman and beneish models: The case of enron,” International Journal of Economics, Commerce & Management, vol.3, no.1, pp.1-18, (2015)
[13] BoG. “Capital requirements directive,” (2018) Retrieved from https://www.bog.gov.gh/privatecontent/Banking_Supervision/Basel%20II%20-%20BOG%20CRD%20Final%2027%20June%202018%20%20Basel%20Committee%20BSD.pdf
[14] Sajjan, R. “Predicting bankruptcy of selected firms by applying Altman’s z-score model,” International Journal of Research – Granthaalayah, vol.4, no.4, pp.152-158, (2016)
[15] BoG., and FIC Gh. “Anti-money laundering/combating the financing of terrorism & the proliferation of weapons of mass destruction (aml/cft & p): Administrative sanctions and penalties for banks and non-bank financial institutions in Ghana,” (2018) Retrieved from https://www.bog.gov.gh/privatecontent/Public_Notices/Anti%20Money%20Laundering%20BOG%20penalties%20-%20Comprehensive%20amended.pdf
[16] Park, J. “Developing and validating an instrument to measure colleague students’ inferential reasoning in statistics: An argument-based approach to validation,” Doctoral Dissertations, University of Minnesota Digital Conservancy. (2012) Retrieved from http://hdl.handle.net/11299/165057
[17] Repousis, S. “Using beneish model to detect corporate financial statement fraud in Greece,” Journal of Financial Crime, vol.23, no.4, pp.1063-1073, (2016)
[18] Bartholomew, D. C. and Egbo, M. N. “A discriminant function analysis approach to country’s economy status,” Journal of Advanced Statistics, vol.2, no.4, pp.125-136, (2017)
[19] GSE. “Listed companies,” (2018) Retrieved on 6th June 2018 from https://gse.com.gh/listing/listed-companies
[20] Hájek, P. and Myšková, R. “Comprehensive assessment of firm financial performance using financial ratios and linguistic analysis of annual reports,” Journal of International Studies, vol.10, no.4, pp.96-108, (2017)
[21] Chukwunonso, E., Justina, O. N., and Ugochukwu, N. J. “Assessing the risk of fraud in the published ifrs and Nigerian gaap financial reports: A comparative application of the beneish models,” The IUP Journal of Accounting Research & Audit Practices, vol.14, no.1, pp.21 – 42, (2015)
[22] Toms, S. “|Fraud and financial scandals: A historical analysis of opportunity and impediment,” MPRA Paper No. 68255, (2015) Retrieved from https://mpra.ub.uni-muenchen.de/68255/1/MPRA_Paper_68255.pdf
[23] Verschoor, C. C. “Did ernst & young really assist financial fraud?” Strategic Finance, vol.92, no.9, 14-17, (2011)
[24] Dičevska, S., Karadjova, V., Menkinoski, G., Nikolovski, P., and Zdravkoski, I. “The concept of audit risk,” International Journal of Sciences: Basic and Applied Research, vol.27, no.1, pp.22-31, (2016)
[25] Rashedi, E. and Sardasht, M. S. “Identifying influencing factors of audit risk model: A combined fuzzy anp-dematel approach,” The International Journal of Digital Accounting Research, vol.18, pp.69-117, (2018)
[26] Valukas, A. R. “Lehman brothers holdings,” Inc., et al.: Chapter 11 case no. 08-13555 – jointly administered. United States Bankruptcy Court – Southern District of New York. Chicago: Jenner & Block LLP. (2010), Retrieved from https://jenner.com/lehman