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Role of Bank Specific, Macroeconomic and Risk Determinants of Banks Profitability: Empirical Evidence from Ghana's Rural Banking Industry

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  • Eric Kofi Boadi

    (School of Management and Economics, University of Electronic Science and Technology of China, Republic of Chin)

  • Eric Kofi Boadi

    (Faculty of Business and Management Studies, Koforidua Polytechnic of Ghana, Koforidua, Ghana)

  • Yao Li

    (School of Management and Economics, University of Electronic Science and Technology of China, People Republic of China)

  • Victor Curtis Lartey

    (School of Management and Economics, University of Electronic Science and Technology of China, People Republic of China)

  • Victor Curtis Lartey

    (Faculty of Business and Management Studies, Koforidua Polytechnic of Ghana, Koforidua, Ghana)

Abstract

This paper analyzes bank specific, macroeconomic and some risk determinants of bank profitability of rural and community banks (RCBs) in Ghana. Fixed effect panel regression analysis is applied on 114 RCBs annual financial reports during the period 2005-2013. The results generally suggests that capital adequacy, asset quality, liquidity management, investment, gross domestic product growth rate, inflation, funding risk and bank resilience risk are significant determinants of RCBs profitability though with varying degrees. Whereas management efficiency, and bank size cannot be considered as positive contributors to RCBs profitability. The study also indicates that continuous profitability performance of RCBs can curtail shortfall in funding risk and enhance RCBs stability

Suggested Citation

  • Eric Kofi Boadi & Eric Kofi Boadi & Yao Li & Victor Curtis Lartey & Victor Curtis Lartey, 2016. "Role of Bank Specific, Macroeconomic and Risk Determinants of Banks Profitability: Empirical Evidence from Ghana's Rural Banking Industry," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 813-823.
    • Handle: RePEc:eco:journ1:2016-02-60
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    References listed on IDEAS

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    2. Albina Kalimashi & Driton Balaj, 2023. "COVID-19 Impact on the Capital Structure of Commercial Banks: Evidence from the Western Balkans," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 76-88.
    3. Christian Kurniawan & Xiyu Deng & Adhiraj Chakraborty & Assane Gueye & Niangjun Chen & Yorie Nakahira, 2022. "A Learning and Control Perspective for Microfinance," Papers 2207.12631, arXiv.org, revised Dec 2022.
    4. Badarau, Cristina & Lapteacru, Ion, 2020. "Bank risk, competition and bank connectedness with firms: A literature review," Research in International Business and Finance, Elsevier, vol. 51(C).
    5. Baolei Qi & Mohamed Marie & Ahmed S. Abdelwahed & Ibrahim N. Khatatbeh & Mohamed Omran & Abdallah A. S. Fayad, 2023. "Bank Risk Literature (1978–2022): A Bibliometric Analysis and Research Front Mapping," Sustainability, MDPI, vol. 15(5), pages 1-27, March.
    6. Campmas, Alexandra, 2020. "How do European banks portray the effect of policy interest rates and prudential behavior on profitability?," Research in International Business and Finance, Elsevier, vol. 51(C).

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    More about this item

    Keywords

    Bank Performance; Bank Specific Determinants; Macroeconomic Factors; Risk Factors;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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