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ENSURING ACCOUNTABILITY IN STATE-OWNED

ENTERPRISES (SOEs): EXAMINING THE ROLE OF ANNUAL

REPORTS FROM A MIDDLE INCOME COUNTRYS

PERSPECTIVE

Hadija N. Odainkey 1* and Samuel N.Y. Simpson 2

*1Hadija Odainkey

Department of Accounting

University of Ghana Business SchoolLegon-Accra

Ghana

Email: hadi.dain@gmail.com

2Samuel N.Y. Simpson

Department of Accounting

University of Ghana Business School

Legon-Accra

Ghana

Email: snysamuel@ug.edu.gh

mailto:hadi.dain@gmail.commailto:hadi.dain@gmail.commailto:hadi.dain@gmail.commailto:snysamuel@ug.edu.ghmailto:snysamuel@ug.edu.ghmailto:snysamuel@ug.edu.ghmailto:snysamuel@ug.edu.ghmailto:hadi.dain@gmail.com

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ABSTRACT

State-Owned Enterprises (SOEs) in developing countries have been the leading

beneficiaries of several reforms in attempts to make them more accountable, thus ensuring

efficiency and effectiveness in their operations. This is because SOEs have been recognized

as one of the key contributors to the socio-economic development in developing

economies. One of the key tools identified for ensuring accountability is their annual

report. However, evidence on the role the annual report plays has been mixed. This study

contributes empirically to the literature on the role of annual reports of SOEs, in the light of

reforms using evidence from Ghana.

Keywords: Accountability, annual reports, SOEs, Ghana

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INTRODUCTION

There have been increasing calls for the public sectors in many developing nations

including Ghana to provide quality public services that meet the needs of its citizens, be

more accountable for its decisions and actions and to manage resources more prudently,

while they foster private market-led growth. These calls have been made on account of the

essential role the sector plays and the contribution it brings to the development process,

especially in developing countries (Hemming and Mansoor 1988). State-Owned Enterprises

(SOEs)., which are part of the public sector, have significant impact on key economic

indicators such as GDP, employment and others, especially in the Middle East, Asia and

Africa (Kumar [n.d.]). In Singapore, SOEs account for about 21.8 per cent of Gross Domestic

Product (GDP). In Asia, SOEs contribute 8 per cent of GDP (Sobhan 2010) whereas in

Indonesia, SOEs total assets amounted to 40 per cent of GDP with contributions to the state

budget amounting to 12 per cent of budget revenue (Abubakar 2010).

For developing economies in Africa, the significance of the public sector cannot be

overemphasized as the sector continues to be the largest spender and employer in virtually

every economy (Independent Evaluation Group [IEG] 2008). In Ghana, SOEs contribute

significantly to the mining sector (87.3 per cent), utilities (93.7 per cent of employment)

and employment (86 per cent of total registered employment (Appiah-Kubi 2001).

Additionally, SOEs from different sectors in Ghana contribute significantly relative to

overall GDP. For instance, the mining sector contributed about 68 per cent to GDP whereas

the cocoa sector contributed about 45 per cent of GDP (Appiah-Kubi).

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The raison detre of SOEs is also justified by the most frequently cited reasons of the

case of the abuse of natural monopolies, capital market failure (Kumar: 24), externalities

and equity issues. The argument for SOEs is that SOEs help to reduce the unequal

distribution of economic surpluses, economic inefficiencies and capital market failure,

(Chang 2007). Kumar (7) points out that the role of SOEs has become even more important

after the financial crisis of 2008 worldwide which emphasized the fact that capitalism was

fragile and that there is the need for more social control over the financial activities in

society.

However, evidence on the performance of SOEs has not been encouraging because

SOEs have not delivered what is expected of them especially in developing economies

(Trivedi 2005). SOEs poor performance has been due to a number of theoretical and

empirical findings (Chang 2007). The World Banks Report (1981 ) shows that the public

sector s poor performance can be attributed to over-extension of the sector, leading to

scarcity of resources, both financial and human and hence slower growth and poor

performance. This retarded growth stems mainly from the increased participation of SOEs

in several industries and sectors of developing countries such as public utilities resulting in

governments being over-stretched financially and managerially. Furthermore, the poor

performance of SOEs has been pointed to issues of governance and financial propriety

among others, irrespective of ownership structure (Kumar: 23).

Theoretically, SOE performance have been said to be determined by how well the

problems of agency theory are addressed as put forward by Shirley and Xu (1998) and

Chang (2007). Information asymmetry, which is one of the problems of agency

relationships, exists because principals have imperfect information and cannot monitor the

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actions of agents perfectly. As a result, inefficient management becomes an apparent

problem because of the inherent difficulty in verifying whether poor enterprise

performance is due to shirking by the managers or circumstance beyond their control

(Chang 2007). Shirley and Xu further argue that one way of inducing the agent to work in

the interest of the principal is to include promises of incentives based on achievement in

written contracts between the agent and principal (3).

To this end, various reforms have been developed to make SOEs more efficient in

their utilization and allocation of resources which can be grouped into institutional

reforms, privatization, increasing competition and political and administrative reforms. For

some, SOE reforms serve as a panacea to the economic woes of most developing countries.

In Ghana for instance, the problems of SOEs precipitated the call for the Structural

Adjustment Program in the 1980s which was initiated by two Bretton Woods institutions,

the IMF and the World Bank.

At the core of these reforms is the issue of accountability which affects governance

and transparency. The International Federation of Accountants [IFAC] (2001) explains

accountability as the process whereby public sector entities and the individuals within

them, are responsible for their decisions and actions, including stewardship of public funds

and all aspect of performance, and submit themselves to appropriate external scrutiny

(12). Similarly, the Economic Commission for Africa [ECA] (2003) describes accountability

as including the receipt of information about the consequences of decisions made by

identified decision-makers.

As the icon of the New Public Management (Bovens 2006), accountability also

includes effective accounting, and making public officials responsible for their actions and

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responsive to consu mers (World Bank 1989; 1992: 5). The justification of actions and the

answerability for implementation by management as noted by (Day and Klein 1987) must

be according to agreed criteria of performance. It is not surprising therefore that public

sector reforms especially the ones relating to institutional reforms have been aimed at

improving the quality of information regarding SOE performance (Chang 2007). Chang

points out that information, when generated and meaningfully used serves as a monitoring

mechanism and thereby improve performance.

From the foregoing discussions, it can be seen that one of the essential pillars of

accountability as revealed by Mack and Ryan (2004) is that users have access to relevant

and timely information so as to evaluate the enterprises progress and performance vis--

vis stated objectives. The annual report has been identified as one of the key instruments

for carrying out this accountability function.

Some authors hold the view that the annual report is the only comprehensive

statement available to the public and a key mechanism by which the public sector is held

accountable for their effective, efficient and economic use of public resources (Boyne and

Law 1991; Rutherford 2000; Coy et al . 2001; Mack et al . 2001) others such as Daniels and

Daniels (1991) question the usefulness of the annual report arguing that the information

contained in the report is not sufficient to evaluate financial condition. Steccolini (2004)

also argues the annual report is a complex report, prepared to meet legal requirements

often producing poor quality reporting and mainly delivered to internal stakeholders, a

view supported by Mack and Ryan 2007 and Tooley et al . (2009).

In spite of this, the annual report remains the key medium for performance

monitoring and evaluation of SOEs. For instance, in Ghana, the annual report serves not

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only as a tool for accountability but also a tool to assess the quality of targets in

Performance Contracts, to define the relationship between managers of SOEs and the state,

and to monitor and evaluate the performance of SOEs.

Literature on the role of annual reports in the public sector however, have been

dominated by empirical studies in advanced countries such as the United States of America,

Italy, Australia and Spain as shown in Table I. Even though some research has been done

with respect to developing countries (Selaratana 2009), there is still a relative dearth of

empirical studies on the role of the annual report in the public sectors of developing, ex-

colonial and emerging countries especially in the SOE sector. This study therefore attempts

to address these gaps. The focus of the SOE sector stems from the fact that SOEs are

different from other areas of the public sector in that, they are legal entities with the

government as regular shareholder, operate in commercial activities and pursue financial

objectives with returns on their investment through dividends (Mack 2004).

The unique nature of SOEs, increased public scrutiny of the expenses incurred in

producing annual reports coupled with the poor performance of SOEs makes a study of this

sort important. This study not only provides insights and contributes empirically to the

literature on annual reports as tools of accountability but also is useful for an audience of

policy makers, boards of SOEs and preparers of annual reports in their quest to ensure

accountability.

The aim of this paper therefore is to examine the role of the annual report in ensuring

accountability of SOEs in Ghana. More specifically, the following aspects of annual reports

are discussed:

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The accountability mechanisms addressed in annual reports

The content and mix of information contained in annual reports and how they have

changed over time, if any

The stakeholders and their interests addressed in SOEs annual report

The patterns of accountability between SOEs in different industries and sectors of

the Ghanaian economy

To achieve this study relied on data from Ghana given the valuable insights such

research could offer to Western scholars. The experience from Ghana is very interesting

and acts as a good example in broadening the understanding of SOEs accountability for

three main reasons: the first country in Sub-Saharan Africa to take the route of SOEs for

national development; the first country to experiment the externally sponsored SOE

Reform Programmes (SOERP) ; and one of the few countries tagged the star pupil of the

World Bank in relation to the SOERPs.

The rest of the paper is organized as follows: the next section reviews prior related

research on the role of the annual report as an accountability tool. Afterwards, a brief

overview of SOEs in Ghana is given and this is complemented by a discussion of the

accountability relationships and reporting of SOEs in the light of reforms. The paper then

continues with a description of the research methods used in order to address the

objectives of the study. The findings of the study are presented and discussed in the

subsequent section and the paper ends with conclusions, recommendations and

suggestions for further research.

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REVIEW OF PRIOR LITERATURE

There have been a prior studies conducted which aimed at examining the role

annual reports play as a tool for discharging accountability in the public sector. This study

fits into the framework of these studies and contributes to extant literature. For the

purposes of this study, it is useful to categorize them in relation to their concept, scope,

approach and findings (Table I).

Law (2001) took an empirical approach to assessing the usefulness of the annual

report as a mechanism of accountability. She analysed the annual report of Chief Constable

for 22 years and found out that for the annual report to be the principal means by which an

authority is held to account, it must contain improved measures of performance. Earlier in

1991, Daniels and Daniels surveyed three user groups to find out what they wanted in

financial reports. Their study showed that the inclusion of performance information (five

or ten year trend) was desirable and would shed more light on the performance of public

sector organizations (33). Ryan and Ng (2000: 19) also echoed this view when they used

the content analysis technique to analyse 18 government agencies annual report. Their

study revealed that the disclosure for accountability in terms of evidence of reporting to

stakeholders on performance purposes appeared to be lacking. The above results were

also supported by Tooley et al. (2010:118) when they verified that performance

information apart from financial statements was of more importance.

Stecollini (2004) studied the annual reports of Italian local governments by using a

checklist developed on the basis of literature on disclosure and accountability indices.

Later, Herawaty and Hoque (2007) extended their study to include federal government and

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analysed the annual report of 56 government departments using the content analysis

technique and a disclosure index. Their study revealed that there were lower levels of

mandatory disclosures than voluntary.

Similarly, Mack and Ryan (2007) also studied local government departments but

extended their study to include government-owned corporations (Table 1). In their study, a

survey instrument was used to find out the actual users of annual report and their

information needs. They found out that the annual report was not the most important

source of information. Tooley and Hooks (2009) analysed the annual report of 37 schools

in Queensland. In their study, they found that the annual report though useful, had an

overemphasized role as a source of information in discharging accountability. They also

found that accountability may be discharged more effectively through other media other

than the annual report since respondents relied on alternative media such as newsletters

and other forms of discussions and interviews.

While the above related research on the role and usefulness of the annual report in

discharging accountability has been international in focus, there has been little evidence

from SOEs in developed and developing countries especially those in the Sub-Saharan

region.

Most of the existing studies, with few exceptions (Ryan and Ng 2000; Mack and Ryan

2007) focused on single sources of data. This study however adopts a triangulated

approach b analyzing the information in the annual reports and conducting interviews. The

interviews help to confirm the findings resulting from the annual report and also reveal

insights which the analysis could not show and vice versa. This study addresses the above

mentioned gaps through an examination of accountability mechanisms of SOEs.

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Table I: Review of prior related research

Year/ Author(s). &(Setting).

Context (public sector). Key findings

1991-Daniels&Daniels(United States)

Municipal Study revealed a range of user information preferences including additionalinformation on trends, cost of services etc.

1997-Alijarde (Spain) Local Government Results showed that financial reporting of local governments can be useful

for a varied number of users even though information may not be used to itsmaximum1999- Tayib et al. (Malaysia)

Local Government Results revealed there is a wide expectation gap between the needs of usersof financial accounts and statutory requirements for financial reporting

2000-Ryan & Ng(Queensland, NewZealand)

SOEs, State-Government Department, LocalGovernment, StatutoryBodies

Revealed that the disclosure of accountability appeared to be lacking in thearea of performance and conformance

2001-Law (UnitedKingdom)

Police Department Revealed improvement in the quality information over time but do not contain information necessary for accountability

2004-Steccolini(Italy)

Local Government Results showed that annual reports appear to be discharged to internalusers, comply with legal requirements and less information on performance

2004-Mack (Australia)

Central and LineDepartments

Disclosed that users preferred performance information to general purposefinancial statements, offering support for the notion that content of general

purpose financial information maybe mis-specified2007-Herawaty andHoque (Australia)

Federal, State andTerritory Government

Found out voluntary disclosure level is higher than the mandatorydisclosures; low level of disclosures in areas of human resources, asset management, external scrutiny, purchasing and contracting

2007- Mack and Ryan(Australia)

Government Departments, LocalGovernment, SOEs

Illustrated that the annual report is an important source of information but not the most important; different stakeholders placed different importanceon the annual report

2008- Stanley et al .(Queensland, New

Local Government Revealed low scores for items in disclosure index

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Zealand)

2009-Selaratana(Thailand)

Ministries andDepartments

Results indicated that government departments produce annual reports tomeet government requirements; departments focus more on reporting onwebsites than in annual reports

2010-Tooley et al. (Malaysia)

Local government Showed that stakeholders showed stronger interest in performanceinformation that is not traditionally disclosed in financial statements

Source: Researchers elaboration

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OVERVIEW OF SOES IN GHANA

In Ghana, SOEs development dates back to the colonial era when governments

sought to wrest control over the commanding heights of the econ omy from the private

sector (Appiah -Kubi 2001). As a result, several SOEs were created which created job

opportunities. By the year 1966 for example, the number had increased from four at

independence to 53 state enterprises (Killick, 1978 in Appiah-Kubi) and increased

employment from 11,052 to 115,826 between 1957 and 1966 (Adda 1992). In 1987, the

number of SOEs had risen to more than 300 including joint ventures (Appiah-Kubi, 2001:

201). In spite of the difficulty obtaining accurate comparative aggregate data on SOEs and

their contribution, the State Enterprises Commissions (SEC) records obtained show that as

at December 2011 there are 35 SOEs in Ghana. SOEs in Ghana are mainly in the

manufacturing industries, extractive - mining, quarrying, and utilities industrial, domestic

power and water supply. In fact, SOEs contribution to the value of industrial output is about

30 per cent (Ghana Statistical Service, 2003).

SOEs became objects of government interference and this caused them to suffer

greatly as the government was engaged in all sectors of the economy including mining,

utilities, business and financial services and manufacturing (Appiah-Kubi). Their

performance began to dwindle as they became a threat to economic stability and

development. This was accounted for by the increase in subvention from 1.1 billion in 1982

to 7.35 billion in 1986 (Tsamenyi et al . 2007). Furthermore, no interests or principal

repayments on loans had been paid by SOEs as a result of the poor financial returns that

they were generating which was not enough for their self-sustenance (Tsamenyi et al .).

Several attempts were made in order to reform the sector due to the budgetary burdens

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and poor financial performance flowing from managerial incompetencies, poorly defined

goals and objectives, corruption and poor incentives (Jefferis 1994; Sandbrook 1988;

Killick 1983 in Appiah-Kubi). More so, the negative net financial results grew worse and the

need for a more comprehensive reform became a matter of concern for the government.

Several governments pursued different policies in order to restructure the sector.

For instance, the government under the National Liberation Council offered 30 state

enterprises for sale (Appiah-Kubi). The PNDC government also embarked on reforms with

the goal of improving the management and financial performance of SOEs (Appiah-Kubi :

204). Key among the reforms was the SOE Reform Programme (SOERP). which led to

changes including the reshuffling of management and signing of Performance contracts.

Additionally, in order to enhance the role of boards of SOEs and their accountability for the

performance of their enterprises, a Corporate Restructuring Programme (CRP) was

initiated (Appiah-Kubi: 205). Currently, there are still calls by the Ministry of Finance and

Economic Planning (MOFEP) for SOEs to make judicious use of state resources to realize

performance targets and yield dividends in order to boost the countrys socio -economic

development (MOFEP/PPA 2008). These calls are made on the premise that SOEs

contributed only GH 5.2 million out of a total of GH 15 million from governments

investments in joint ventures and SOEs by the end of 2009.

Accountability and reporting

Figure I illustrates a model of the nature of the accountability relationship among

SOEs. Broadly SOEs in Ghana are categorized into sub-vented and non-subvented. Sub-

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vented SOEs are generally described as those enterprises whose salary expenses are

funded by the state whereas the salary expenses of non-subvented SOEs are not funded by

the state. However, for both of these categories, their capital projects are funded by the

state. SOEs fall under the various ministries under the central government. This

distinction is important in this study because it suggests that some differences may likely

exist in terms of the information contained in annual report as well as the identity of users

and their information needs. Thus, for the purpose of this study, enterprises from these

categories were chosen for inclusion in this study. Some of the ministries include Energy,

Communications, Finance and Economic Planning, Water, Resources and Works and Food

and Agriculture. The Ministry of Finance and Economic Planning (MOFEP) plays a major

role in the regulatory framework of SOEs since it provides the resources that are

appropriated from Parliament to SOEs. SOEs account to the MOFEP and SEC for how the

resources given to them have been used (Figure I). SEC which was established in 1987

under PNDC Law 170 was charged to among other things, promote efficient and profitable

operation of the SOEs utilizing the tools of corporate planning, performance contracting,

monitoring and evaluation, to monitor and evaluate their performance in relation to agreed

targets and to ensure good corporate governance and practices in the SOEs.

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Figure I: Accountability relationship of SOEs in Ghana

Source: Researchers own elaboration,

The introduction of reforms and attendant accountability expectations can be said

to be adequately covered in the annual reports issued by SOEs. Several factors may have

accounted for this including the requirement for SOEs to comply with the provisions of the

Companies Code and to prepare their annual reports in accordance with the Code.

Additionally, the introduction of Performance Contracts in 1989 as part of a Performance

Monitoring and Evaluation system compelled all SOEs operating under Performance

Contracts to submit annual reports. The annual report serves as a tool for performance

evaluation as well as assessing as well as assessing the quality of performance targets set

by SOEs. To that end, it can be estimated that the number of SOEs operating under the

Performance Monitoring and Evaluation system submitted annual report are as shown in

the table below.

MOFEP

SOEs

SEC Sector Ministry (s)

Sub-vented Non-Subvented

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Table 2: Number of SOEs issuing annual reports

Year 89 90 91 92-93 96 97 98 99 00 01 05 06 07 08 09

No. of Annual

Reports

12 15 17 30-47 40 33 31 19 26 29 27 29 30 29 28 34

Research design

The study adopts a qualitative case study approach and relied on multiple sources of

data for triangulation purposes. These include documentary data such as annual reports of

SOEs, and data from regulatory and legal sources. The study also interviewed people from

different sources to confirm and clarify some of the vague issues arising from analyzing the

documentary evidence. The annual reports of SOEs are collected from the database of the

State Enterprises Commission (SEC). In all, 40 annual reports (2005-2008) from SEC were

collected. All the annual reports collected were used as sample in analyzing the

accountability role of the annual report. The list of SOEs whose annual reports are analysed

is shown in the Table below.

Table 3: Characteristics of sample SOEs in Ghana

Sample characteristics Number of SOE(s).

Sector Ministries 8

Finance and Economic Planning 2

n= 10

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The study of the annual reports followed the standard procedures of Marston and

Shrives (1991). Truex (1996) and Hsieh and Shannon (2005) involving what is contained in

literature and other regulatory and legal data. This was done in order to explore whether

there are mandatory or voluntary items of accountability in order to categorize the items as

mandatory or voluntary. The items were further grouped into financial and non -financial

(governance and other information). The annual reports were also grouped under the

various sector ministries as this helps to locate the varying patterns of accountability

among the different SOEs.

Semi-structured interviews were conducted among two groups of interviewees:

users and preparers. Each interview lasted for not less than thirty-minutes. Interviews

were audio-recorded, transcribed and coded into data which was further classified into

meaningful categories, with reference to the purpose of the study. This then was expressed

through the research questions and matched with the findings from the analysis of the

annual reports.

Discussions

The complex nature of accountability results in multiple sets of accountability

mechanisms. The study focused on financial and non-financial information and governance

information. Financial accountability is represented by the presentation of financial

statements (Gray and Jenkins 1993; Hupkes et al . 2006; and Rabrevonic 2009). Governance

accountability refers to the information reflecting how the enterprise is managed and

controlled (Guarini 2000). Other information includes projections and targets, narratives,

information on trends and others (Stewart 1984; Hupkes et al . 2006; Clark 2003).

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Table IV provides an analysis of the accountability criteria provided by SOEs on each

of the accountability categories. The results show that on average, SOEs account for about

71 per cent of the total financial accountability criteria. Out of the eleven (11)

accountability criteria on governance, SOEs had an average score of about 87 whereas the

average score of performance criteria was about 12 per cent out of 5 criteria.

Table 4: Overall average score of each accountability category

Accountability Criteria Average Score

Possible

Score

% Average

Score

Financial (M). 12.0687 69 0.1749

Financial (V). 11.2928 21 0.5378

Total 23.3615 90 0.7127

Non-Financial

Governance (M). 2.7 4 0.6750

Governance (V). 1.3428 7 0.1918

Other information 0.6200 5 0.1240

Total 4.6628 16 0.9908

This means that while the level of accountability of SOEs in terms of financial

accountability was high (more than 60 per cent)., that of governance was higher (over 80

per cent). Financial accountability seems to be a key preference of information of users of

SOEs annual report. One of the users of the annual reports commented:

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They have their strategic plans linked to the governments policies, so the returns we

are expecting from them normally are whether they are in line with what they have

requested. For policies which they have carried out, every quarter we expect them to

tell us what they really used the resources to do what they said they would do. That is

the major reason why we are expecting the reports, so that we can cross-check and

find out whether what they told us that they would do, they are doing. So for annual

reports they are the means by which we evaluate them, and be able to give them pure

indicators of which we track later on (Schedule Officer, U1).

On the other hand, other non-financial information (projections, indicators of

growth, targets and others) was very low (below 20 per cent). The high accountability

levels exhibited by the SOEs in terms of financial and governance can be attributed to the

fact that most of the accountability criteria in these categories are mandatory in nature.

SOEs are expected to account for the mandatory information otherwise they may face

sanctions and penalties from regulatory and oversight bodies. However, it appears that

users may require more interesting and useful information that may assist them to make

informed decisions regarding budget plans and targets. This was echoed by one of the

interviewees:

We would like the reports to be convincing. To convince us that they have utilized the

resources according to how they initially said they would. (Schedule Officer, U1).

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Another user of the SOEs annual report confirmed this view when he stated:

I think that if other information is included, which we are asking them to do, then we

will have a better picture of their operations that will help in our performance

contract programmes (Accounting Consultant, U2).

Information on trends, ratios and future targets may give more insight into this

information need of users (Daniels and Daniels, 1991). Additionally, voluntary financial

accountability was higher than mandatory accountability because most of the items

required to be accounted for did not apply to some of the SOEs for instance the

accountability for extra-ordinary items. The high level of governance accountability is

expected because of the rising interests in corporate governance in Ghana. It is noteworthy

however that even though governance accountability was low in relation to voluntary;

some of the SOEs gave a fair account of governance.

An analysis of trend reveals that there was a marginal increase in the average

accountability level over the four years under study. This increase is observed from year to

year as shown in Figure 1. The positive change in the accountability level from year to year

indicates that even though the average level of accountability is moderate, some of the

SOEs are improving on the level of their accountability.

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Figure 1: Trend of average accountability score for the SOEs (2005-2008).

The level of accountability for each of the categories also changed from year to year

within the four year period. However, the marginal changes in the overall level of

accountability are seen to be driven mainly by the consistent increases in financial

accountability over the period as the other two categories appear to be fluctuating.

Patterns of accountability

SOEs accountability vary from sector to sector (Table 5). as a result of the nature of

activities that they engage in as well the size of the SOE. SOEs accountability also varies

largely in relation to the nature of their stakeholders. Stakeholders who have a large

interest in SOEs require more information as compared to those who have less. The

formation and nature of SOEs determines the information content of annual reports.

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Table 5: Summary statistics of accountability scores of SOEs by sector

Sector/ Ministry Mean Standard deviation Max Min

A 25.14 0.90 26.72 23.60

B 24.69 0.85 25.54 23.85

C 20.37 0.00 20.37 20.37

D 24.69 0.66 25.34 24.03

C 24.95 0.00 24.95 24.95

F 20.42 0.00 20.42 20.42

Table 5 examines the patterns of accountability of SOEs by sector. This analysis

indicates that on the average, patterns of accountability in SOE sector vary from sector to

sector ranging from overall accountability mean score of 25.14 and 20.37. The high overall

accountability score exhibited by SOEs can be credited to the other industry specific

accountability requirements for these SOEs. Additional regulatory requirements together

with the enforcement of these laws by these regulatory bodies contribute to the different

patterns of accountability of SOEs in the sector as compared to SOEs in other sectors. This

was confirmed by one of the preparers of SOEs annual report as follows:

That may not be the case. Others may not be like XX. Others may not be bothered by

external organizations because they may not go to them for anything They have

their formats. So in the course of the year, they want to know how production is going.

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So for that matter, we give them information on production statistics, stocks,

quantities we have shipped (Accounts Manager, P1).

Based on this, some SOEs provide information which may not be required of other

users. SOEs accountability is often user-specific and this may not necessarily be the same

for all the SOEs. One of the interviewees from the SOE interviewed had this to say:

When we refer to SOEs we need to focus on the way it was formed, so here we mean the

legislative that governs the SOE, that is what makes it State-Owned and also the

shareholding. All of them report per the Companies Code but where performance

contracts are involved then more is required in addition to annual reports (Accounting

Consultant, U2).

Conclusions and recommendations

As most of the existing annual report studies in the public sector have focused on

developed countries and other forms of government other than SOEs, this present study

aids to fill this gap in the literature. This study covers the sector ministries and presents

trends in accountability information by based on an analysis of 40 annual reports of SOEs

of these sectors from 2005-2008. The results show that Ghanaian SOEs tend to account for

both financial and non-financial results of their operations.

The accountability issues frequently addressed by Ghanaian SOEs include

governance accountability, financial and legal accountability. Significant differences are

also found among the various sectors, with the some sectors addressing issues of

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accountability than other sectors. The stakeholders frequently addressed by Ghanaian

SOEs include oversight bodies and sector ministries.

In the early years, annual reports of SOEs studied were poor as compared to the

later years studied. Furthermore, SOEs annual report lacked innovation in reporting of

other useful information. Key among such innovations is information on corporate social

responsibility (CSR). It came to light that most of the SOEs sampled did not report on CSR.

Annual reports of SOEs who reported on corporate responsibility activities contained

scanty information. CSR is a means of ensuring that SOEs are held accountable for the social

and environmental impact they have on society. In order to ensure accountability among

SOEs, information provided through the annual reports can be enhanced when guidelines

are formulated by relevant public bodies.

This research has shown that SOEs annual reports are useful tools in ensuring

accountability even though there is more room for improvement especially non-financial

information. In developing countries annual reports are very useful when used in

conjunction with performance contracts of SOEs. This is because the annual report serves

as a major tool performance evaluation and monitoring and as a check on the quality of

targets set by managers of SOEs. A major limitation of this study is that it covers 40 annual

reports and thus the results may not be representative of Ghanaian SOEs in general.

More studies should be conducted especially on developing countries where SOEs

are undergoing several reforms. An extended analysis of annual reports can be studied to

trace the trend of annual report in recent years and the major factors that influence the

accountability information over time and this can be compared among different SOEs. This

would give a more detailed picture of the role of the annual report in SOEs.

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