ABSTRACT

The main objective of this study is to identify factors that significantly influences the performance of equity mutual funds in Ghana. The Ghana Stock Exchange (GSE) like most other West African Exchanges is not robust. The market is not price sensitive to market information and hence the question how and what factors influence the performance recorded by the market. This uncertainty about the main drivers of performance of equity mutual funds in Ghana motivated the research on the topic “Determinants of Equity Mutual Funds Performance in Ghana”

The variables employed in the study included the Gross Domestic Product (GDP) of Ghana, Sex of the fund manager, Age of the fund, the Ghana Stock Exchange All Share Index and the Size of the fund measured as the total net asset under management (TAUM).

Consequently, Panel data regression method was employed for the formulation of the models to be used in the study and STATA 12 is also employed for the analysis of the data gathered for the period 2010-2017 which is the study period.

The fundamental findings of the study were that the Total Net Asset under Management (TAUM) and the GSE-All Share Index were relevant and significant factors to explain the performance of equity mutual funds in Ghana. However, the Sex of the fund manager, the Gross Domestic Product (GDP) and the age of the fund in operation were not relevant enough to be considered as factors in determining the performance of equity mutual funds in Ghana.

It is recommended that the government should ensure that the macroeconomic variables of the economy are well managed since they have an influence on the performance of mutual funds in Ghana. It is also recommended that Equity mutual fund managers should strive to increase the size of their funds as this is seen to influence performance positively over time.

In conclusion, it is established that the Total Net Asset under Management (TAUM) and the GSE- All Share Index are more significant factors to explain the performance of equity mutual funds in Ghana. The Sex of the fund manager, the Gross Domestic Product (GDP) and the Age of the fund in operation least important in considering factors in determine the performance of equity mutual funds in Ghana.

CHAPTER ONE INTRODUCTION

         Background to the Study

Equity represents part ownership of an entity. Firms issue shares in an attempt to gather or obtain funds in order to meet the recurrent or capital needs of the firm. The issuance of shares by a firm could take the form of a common stock or a preferred stock. Common stock holders are usually referred to as the real or true owners of the firm or institution, otherwise called the ordinary shareholders. This stems from the fact that, these shareholders are usually the last to be paid in the event of liquidation. The issuance of a common stock entitles the shareholder to certain rights, such as the right to proxy voting, thus entitling the shareholder to delegate his voting right to another, usually through a written authorization to enable the elected person exercise the right on behalf of the shareholder in matters concerning decision making especially in his absence. They also have the right to vote in the election of the board which constitutes the basis upon which the checks and balances of the firm are constituted and further help in the formulation and development of organizational policies. Also the common shareholder has the first opportunity at buying any newly issued shares before it is opened to the public. This is to make room at enabling the shareholder either retain or acquire more shares before dilution through the issuance of new shares. This is referred to as the preemptive rights of the ordinary shareholder. This is usually issued to the ordinary shareholder before a seasoned offering is made by the firm to the general public. The preferred shareholder on the other hand is entitled to be paid first in the event of any liquidation unlike the common shareholder. The preferred stock holder is not entitled to voting rights in the making of organizational rules and the taking of decisions unlike the ordinary shareholder. The preferred shareholder is merely an investor in the firm or organization and is not concerned by the running of the firm. The preference shareholder’s dividend payment takes

priority over that of the common shareholder’s dividend payment, thus the preferred shareholder in the event of deferment of the payment of dividend, will be entitled to the payment of all accrued dividend when payment resumes before any dividend may be paid to the ordinary shareholder. This is in the fact that; the preferred shareholder has a claim on the firm’s assets but are however subordinates to bondholders in relation to the issue guarantees which are usually given to bondholders other than the preferred shareholder.