Ownership, Governance and Enterprise Efficiency: Evidence from Ghana

This study estimates the efficiency levels of firms in the manufacturing sector of Ghana using a single-stage stochastic frontier technique. A five-year panel data of 135 observations made between 2005 and 2009 are considered. The results show that the frontier model instead of the traditional average response (OLS) function is an adequate representation for the data. Findings reveal that employment, capital, corporate governance, ownership, and years of firm operation/experience have reasserting influence on the productivity of the firms. However, research and development and time which are used as a proxy for technological progress are found to have negative influence on the firm’s output. The combined effects of factors involved in the technical inefficiency model are responsible in explaining the level and variations in the production of the firms in Ghana, although individual effects of some variables are not significant. Over all, private firms fared better. However, the predicted mean technical efficiency is estimated to be 38 percent. This finding indicates that there is high potential for increasing firm’s output by an average of 62 percent in the short-run without anyadditional resource by adopting the practices of the best firm.