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Credit Risk Management and Profitability of Banks Listed on the Ghana Stock Exchange

Author

Listed:
  • John Kwaku Mensah Mawutor
  • Kezia Bortey
  • Bernardine Ansah
  • Faustina Osei- Frimpong
  • Worlanyo Kumassah

Abstract

This study analyzed the relationship between credit risk management and profitability of banks on the Ghana Stock Exchange (GSE). A secondary data in a panel form of 7 banks listed on the Ghana Stock Exchange was examined over a period of 7 years, using a linear multiple regression models. Two key measures of profitability were analyzed in this study that is Return on Asset (ROA) and Return on Equity (ROE). The independent variables included in the regression models were non-performing loans to total loans and advances (NPLR), and loans and advances to total deposits (LATD), bank size, leverage and growth. The results for the study indicated that LATD have significant negative relationship with ROA and ROE but NPLR have insignificant negative relationship with both ROA and ROE. It was recommended that Credit officers must ensure that customers looking for loans meet all the necessary requirements through proper due diligent.

Suggested Citation

  • John Kwaku Mensah Mawutor & Kezia Bortey & Bernardine Ansah & Faustina Osei- Frimpong & Worlanyo Kumassah, 2015. "Credit Risk Management and Profitability of Banks Listed on the Ghana Stock Exchange," International Journal of Empirical Finance, Research Academy of Social Sciences, vol. 4(7), pages 396-406.
    • Handle: RePEc:rss:jnljef:v4i7p1
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