IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2022-04-5.html
   My bibliography  Save this article

Drivers of Banks Financial Performance

Author

Listed:
  • Evans Te

    (University of Professional Studies, Accra, Ghana.)

  • Lawrance Asari Boadi

    (University of Professional Studies, Accra, Ghana.)

  • Philomena Dadzie

    (University of Professional Studies, Accra, Ghana.)

Abstract

A significant number of banks folded up during the Ghanaian banking financial crisis of 2017 to 2018 causing significant social costs as well as impeding economic growth. We take a step backward to present the significant drivers of the profitability of banks in Ghana. Obtaining panel data from the banks websites, the Ghana Statistical Service (GSS), and the Ghana Stock Exchange (GSE), the regression analysis was used to assess the drivers of profitability of banks in Ghana. The findings show that the bank-specific variables had no combined effect on profitability. Hence, the study concludes that the bank-specific variables do not have a significant influence on the performance of the Ghanaian listed banks. On the other hand, some of the external factors were observed to have a significant influence on profitability. The findings further showed that the drivers of profitability of the Ghanaian banks were, inflation, capital adequacy, and monetary policy. Since these are all external factors, the banks must learn how to predict and anticipate the external factors and make adjustments in their operations to enable them to improve profitability. While this study recommends to the managers of Ghanaian banks to be cautious in their operational decisions, the economy must also be managed soundly to ensure the growth of banks and hopefully avoid future crises.

Suggested Citation

  • Evans Te & Lawrance Asari Boadi & Philomena Dadzie, 2022. "Drivers of Banks Financial Performance," International Journal of Economics and Financial Issues, Econjournals, vol. 12(4), pages 34-39, July.
  • Handle: RePEc:eco:journ1:2022-04-5
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijefi/article/download/13162/6799
    Download Restriction: no

    File URL: https://www.econjournals.com/index.php/ijefi/article/view/13162
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Fadzlan SUFIAN & Muzafar Shah HABIBULLAH, 2009. "Bank specific and macroeconomic determinants of bank profitability: Empirical evidence from the China banking sector," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 4(2), pages 274-291, June.
    2. Gary C. Zimmerman, 1996. "Factors influencing community bank performance in California," Economic Review, Federal Reserve Bank of San Francisco, pages 26-40.
    3. Pilar B. Álvarez-Franco & Diego A. Restrepo-Tobón, 2016. "Managerial efficiency and failure of U.S. commercial banks during the 2007-2009 financial crisis: was this time different?," Revista Ecos de Economía, Universidad EAFIT, vol. 20(43), pages 4-22, December.
    4. Fadzlan Sufian, 2010. "Financial depression and the profitability of the banking sector of the Republic of Korea: panel evidence on bank-specific and macroeconomic determinants," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 17(2), pages 65-92, December.
    5. Shekhar Aiyar & Charles W Calomiris & Tomasz Wieladek, 2015. "Bank Capital Regulation: Theory, Empirics, and Policy," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(4), pages 955-983, November.
    6. Constantinos Alexiou & Voyazas Sofoklis, 2009. "Determinants Of Bank Profitability: Evidence From The Greek Banking Sector," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 54(182), pages 93-118, July – Se.
    7. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
    8. Kofi Adjei-Frimpong & Christopher Gan & Baiding Hu, 2016. "Competition in the banking industry: Empirical evidence from Ghana," Journal of Banking Regulation, Palgrave Macmillan, vol. 17(3), pages 159-175, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Md.Thasinul Abedin & Md. Muzammel Dawan, 2016. "A Panel Data Analysis for Evaluating the Profitability of the Banking Sector in Bangladesh," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 3(2), pages 163-171.
    2. Farouq Altahtamouni & Shikhah Alyousef, 2021. "The Effect of Liquidity According to the Requirements of the Basel III Committee on the Profitability of Banks: Evidence from Saudi Banks," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 439-463.
    3. Segun Thompson Bolarinwa & Olufemi Bodunde Obembe, 2017. "Concentration–Profitability Nexus: New Approach from Causality," Studies in Microeconomics, , vol. 5(1), pages 84-98, June.
    4. 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.
    5. Yong Tan, 2018. "The Impacts of Competition and Risk on Profitability in Chinese Banking: Evidence from Boone Indicator and Stability Inefficiency," Annals of Economics and Finance, Society for AEF, vol. 19(2), pages 523-554, November.
    6. Priyonggo Suseno & Omar Bamahriz, 2017. "Examining the impact of bank’s risks to Islamic banks’ profitability," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 9(2), pages 125-137, April.
    7. Yong Tan, 2020. "Competition and Profitability in the Chinese Banking Industry: New Evidence from Different Ownership Types," Journal of Industry, Competition and Trade, Springer, vol. 20(3), pages 503-526, September.
    8. Mirza Vejzagic & Hashem Zarafat, 2014. "An Analysis of Macroeconomic Determinants of Commercial Banks Profitability in Malaysia for the Period 1995-2011," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(1), pages 41-57, January.
    9. Tan, Yong, 2016. "The impacts of risk and competition on bank profitability in China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 40(C), pages 85-110.
    10. Muhammad Ali, 2016. "Bank Profitability and its Determinants in Pakistan: A Panel Data Analysis after Financial Crisis," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 1(1), pages 1-14, March.
    11. Amit Ghosh, 2018. "What Drives Banking Industry Competition in Developing Countries?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 43(4), pages 1-20, December.
    12. Sapto Jumono & Noer Azam Achsani & Dedi Budiman Hakim & Muhammad Fidaus, 2016. "The Effect of Loan Market Concentration on Banking Rentability: A Study of Indonesian Commercial Banking, Dynamics Panel Data Regression Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 207-213.
    13. Ali, Muhammad, 2015. "Bank profitability and its determinants in Pakistan: A panel data analysis after financial crisis," MPRA Paper 67987, University Library of Munich, Germany, revised 01 Nov 2015.
    14. Faluk Shair & Na Sun & Sun Shaorong & Firdos Atta & Muhammad Hussain, 2019. "Impacts of risk and competition on the profitability of banks: Empirical evidence from Pakistan," PLOS ONE, Public Library of Science, vol. 14(11), pages 1-27, November.
    15. Tan, Yong, 2017. "The impacts of competition and shadow banking on profitability: Evidence from the Chinese banking industry," The North American Journal of Economics and Finance, Elsevier, vol. 42(C), pages 89-106.
    16. Fang, Jianchun & Lau, Chi-Keung Marco & Lu, Zhou & Tan, Yong & Zhang, Hua, 2019. "Bank performance in China: A Perspective from Bank efficiency, risk-taking and market competition," Pacific-Basin Finance Journal, Elsevier, vol. 56(C), pages 290-309.
    17. Sefa Awaworyi Churchill & Maria Rebecca Valenzuela, 2019. "Determinants of firm performance: does ethnic diversity matter?," Empirical Economics, Springer, vol. 57(6), pages 2079-2105, December.
    18. Olufemi Adewale Aluko & Funso Tajudeen Kolapo & Patrick Olufemi Adeyeye & Patrick Olajide Oladele, 2019. "Impact of Financial Risks on the Profitability of Systematically Important Banks in Nigeria," Paradigm, , vol. 23(2), pages 117-129, December.
    19. BOITAN, Iustina Alina, 2015. "Determinants Of Sustainable Banks’ Profitability. Evidence From Eu Countries," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 19(1), pages 21-39.
    20. Vera-Gilces, Paul & Camino-Mogro, Segundo & Ordeñana-Rodríguez, Xavier & Cornejo-Marcos, Gino, 2020. "A look inside banking profitability: Evidence from a dollarized emerging country," The Quarterly Review of Economics and Finance, Elsevier, vol. 75(C), pages 147-166.

    More about this item

    Keywords

    Profitability; Ghana; Performance; Internal variables; External variables;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2022-04-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.