Determinants of Share Pricing of Rural and Community Banks in Ghana

Abstract

Over the years Rural and Community Banks have not been able to provide improved and contemporary financial services and compete well with the emerging financial institutions. The main challenge they face is inadequate share capital. Subscription to Rural and Community Banks shares is low and the need to promote interest in existing and prospective shareholders will enable them to take advantage of business opportunities and provide improve financial services. The study examined the impact of share price determinants on the prices of shares of Rural and Community Banks in Ghana. Survey questionnaires were administered on directors and senior managers of twenty five (25) Rural and Community Banks with a response rate of 86%. The data were tested using Regression Analysis and Statistical Package for Social Sciences (SPSS). Accounting and Economic variables were considered to be the main determinants of share pricing. Profitability, Liquidity and Wealth Effect of Investors were sub-variables considered to have relationship with RCBs share pricing and hence good determinants. Dividend Payout as a sub-variable in share pricing was considered weak. The study contributes to knowledge as it addresses the gap in existing literature by focusing on Rural and Community Banks (RCBs) shares unlike those financial institutions whose shares are traded on the Stock Market.

Keywords: RCBs, Shares, Accounting, Economic, Profitability, Liquidity, Wealth Effect of Investors, Dividend Payout