The Determinants of Mergers and Acquisitions in Ghana

Abstract

Background: In this context of uncertainties and the unknown based on economic, financial, and health crises, one of the ways to save companies is the operations of mergers or acquisitions. But not all mergers bring the expected results. An Avalanche of literature has indicated several factors that promote the decision of mergers and acquisitions. Purpose: This paper aimed to investigate the determinants of mergers and acquisitions of listed firms on the Ghana Stock Exchange. Specifically, the study sought to identify and examine the relationship that exists between GDP, Inflation, FDI, Stock Returns, and interest rate on the mergers and acquisitions of listed firms, well as evaluate the failures of mergers and acquisitions in the country. Methodology: The study used an explanatory research design. The population for the study was all mergers and acquisitions between 2010-2018 totaling twenty-five (25). The study used secondary data from Ghana Stock Exchange. Using sample data spanning between 2010 and 2018, the study adopted the GMM estimation technique in its analyses. Findings: The findings from the study revealed that indeed GDP, FDI, and interest rate exhibit a positive and significant effect on mergers and acquisitions of listed firms, whilst stock returns was found to negatively impact merges and acquisitions. Inflation rate was found not significant in the analyses of the study. The study also showed that factors such as limited or no involvement from the owners, theoretical valuation vs. the practical proposition of future benefits, lack of clarity and execution of the integration process, cultural integration issues, actual cost of a difficult integration, and high cost of recovery and negotiations errors are the major causes of the failures of mergers and acquisitions in Ghana. Recommendation: The study recommends that the Ministry of Finance and Ministry of trade must put stringent policies to curb systematic risk, as well as create a conducive environment to promote the inflow of foreign investment into the country.