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Determinants of non-performing loans in Ghana banking industry

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  • Franklin Amuakwa-Mensah
  • Angela Boakye-Adjei

Abstract

The detrimental effect non-performing loans (NPLs) have on banks' income and the economy makes it necessary to examine the determinants of NPLs in the banking industry in Ghana. Using panel regression model, it was found that both bank-specific variables (i.e., previous year's NPL, bank size, net interest margin (NIM), and current year's loan growth) and macroeconomic variables (i.e., previous year's inflation, real gross domestic product (GDP) per capita growth and real effective exchange rate) significantly affect NPLs in the banking industry. Also the sub-sample estimations showed that both bank-specific (i.e., previous year's NPLs and current year's loan growth) and macroeconomic factors (i.e., real effective exchange rate, real GDP per capita growth, and previous year's inflation rate) affect NPLs of large banks. However, whereas bank-specific variables (i.e., previous year's NPLs and current year's loan growth) are important in explaining NPLs, macroeconomic factors are not important in explaining NPLs for small banks.

Suggested Citation

  • Franklin Amuakwa-Mensah & Angela Boakye-Adjei, 2015. "Determinants of non-performing loans in Ghana banking industry," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 5(1), pages 35-54.
    • Handle: RePEc:ids:ijcome:v:5:y:2015:i:1:p:35-54
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    Citations

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    Cited by:

    1. M. A. Zariyawati & M. T. Hirnissa & K. A. Muhammad-Mujb, 2023. "Determinant Factors of Non-Performing Loan among Non-Bank Financial Intermediaries in Malaysia," International Journal of Business and Management, Canadian Center of Science and Education, vol. 16(8), pages 1-48, February.
    2. Aswini Kumar Mishra & Shikhar Jain & Mohammad Abid, 2021. "Non‐performing assets and its determinants in the Indian banking system: An empirical analysis using dynamic panel data models," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5948-5962, October.
    3. Grace Ofori-Abebrese & Robert Becker Pickson & Eric Opare, 2016. "The Effect of Bank Specific Factors on Loan Performance of HFC Bank in Ghana," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(7), pages 185-185, July.
    4. Shuffield Seyram Asafo, 2018. "The Macro-economy and Non-Performing Loans in Ghana: A BVAR approach," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 11(3), pages 65-72, December.
    5. Petr Jakubik & Eyup Kadioglu, 2022. "Factors affecting bank loan quality: a panel analysis of emerging markets," International Economics and Economic Policy, Springer, vol. 19(3), pages 437-458, July.
    6. Githaiga Peter Nderitu, 2020. "Revenue diversification and quality of loan portfolio," Journal of Economics and Management, Sciendo, vol. 42(4), pages 5-19, December.
    7. Odunayo Magret Olarewaju, 2020. "Investigating the factors affecting nonperforming loans in commercial banks: The case of African lower middle‐income countries," African Development Review, African Development Bank, vol. 32(4), pages 744-757, December.
    8. Martin Owusu Ansah & Nicholas Addai-Boamah & Abeeku Bylon Bamfo & Lucy Afeafa Ry-Kottoh, 2022. "Organizational ambidexterity and financial performance in the banking industry: evidence from a developing economy," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 27(3), pages 250-263, September.
    9. Muhammad Waqas & Nudrat Fatima & Aryan Khan & Muhammad Arif, 2017. "Determinants of Non-performing Loans: A Comparative Study of Pakistan, India, and Bangladesh," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 6(1), pages 51-68, January.
    10. Charles Adusei, 2018. "Determinants of Non-Performing Loans in the Banking Sector of Ghana Between 1998 and 2013," Asian Development Policy Review, Asian Economic and Social Society, vol. 6(3), pages 142-154, September.
    11. Ezekiel Adu Mensah. (CA, MCIT, MBA) & Nana Boatemaa Boadi (BSc, MBA) & Juliet Appiah Osei-Afoakwa (B.Ed, MBA, CA, MCIT) & Linda Quansah Ewudzie (BSc, MSc), 2024. "A Comparative Study of Non-Performing Assets of Foreign and Local Banks in Ghana: The Case of GCB Bank Ltd and Standard Chartered Bank in Ghana," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(6), pages 3145-3172, June.

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