IDEAS home Printed from https://ideas.repec.org/a/taf/oaefxx/v9y2021i1p2003503.html
   My bibliography  Save this article

Regulatory capital requirements and bank performance in Ghana: evidence from panel corrected standard error

Author

Listed:
  • Joshua Nsanyan Sandow
  • Emmanuel Duodu
  • Eric Fosu Oteng-Abayie
  • Yudhvir Seetharam

Abstract

Over the past fifteen years, the Bank of Ghana has revised the minimum capital requirement to stabilize the banking sector. Motivated by the unintended consequences of regulatory capital, this paper provides empirical evidence between minimum capital requirement and bank performance relationship in Ghana. We draw data on a sample of 20 universal banks spanning 2008 to 2017. The Panel Corrected Standard Errors (PCSE) estimation was adopted. The results indicate that the minimum capital requirement has a significant positive impact on bank performance measured by return on assets (ROA) and equity (ROE). However, the effects turned negative after 1.7% and 1.6% performance thresholds for ROA and ROE, respectively. Given this, the study establishes the relationship between capital requirement and bank performance in Ghana to be double-edged. The capital requirement improves bank performance initially, but bank performance worsens after the threshold values. Policy implications for Ghana’s banks, regulators, and policymakers have been provided based on the findings.

Suggested Citation

  • Joshua Nsanyan Sandow & Emmanuel Duodu & Eric Fosu Oteng-Abayie & Yudhvir Seetharam, 2021. "Regulatory capital requirements and bank performance in Ghana: evidence from panel corrected standard error," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 2003503-200, January.
    • Handle: RePEc:taf:oaefxx:v:9:y:2021:i:1:p:2003503
    DOI: 10.1080/23322039.2021.2003503
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/23322039.2021.2003503
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/23322039.2021.2003503?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    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:taf:oaefxx:v:9:y:2021:i:1:p:2003503. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/OAEF20 .

    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.