Ghanaian Bank Performance and Ownership, Size, Risk, and Efficiency

• In Event: Financial Reporting--International Evidence

Abstract

Ghanaian banks struggle to maintain sufficient capital after the Bank of Ghana increased the minimum capital requirement as a buffer against the 2008 financial crisis. Grounded in the efficient structure theory, the purpose of this correlational study was to examine the relationships between efficiency, size, risk, and ownership structure on banks’ performance when minimum capital requirement increases. Archival data were collected from PricewaterhouseCoopers website covering all Ghanaian banks with available data for the 5-year period ending 2013. Initial one tail paired sample t tests revealed significant increases over time for efficiency, t (21) = 3.849, p = .001, net interest margin (NIM), t (21) = 5.201, p ≤ .001, return on equity (ROE), t (21) = 1.833, p = .041, and risk t (21) = 3.614, p = .001. The results of the multiple regression analysis indicated the EST models could significantly predict bank performance for the 5-year period ending 2013. X-efficiency model could predict NIM F (8, 123) = 6.94, p =.00, R2 = .288, efficiency and ownership type were statistically significant with efficiency (t = 6.09, p = .001) denoting higher to the model than foreign banks (t = 2.96, p =.004). While, scale efficiency model could predict ROE, F (8, 123) = 5.18, p =.00, R2 = .133, ownership type and size were statistically significant with State banks (t = -2.26, p = .025) denoting more to the model than size (t = 2.00, p = .047).

Authors

• Rebecca Attah, Arizona Health Care Management Services

• Roger William Mayer, State University of New York-Old Westbury

• Wen-Wen Chien, SUNY Old Westbury