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The Impact of Capital Adequacy and Bank Size on Profitability of Ghanaian Banks

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  • Abdulai, Shirazu Kuvidana
  • Umar, Siisu

Abstract

This study examines the influence of capital adequacy ratio and bank size on the profitability of Ghanaian banks from 2008 to 2017, while also considering macroeconomic factors such as inflation and the monetary policy rate. Using return on assets (ROA) as the measure of profitability and analyzing data from seven recapitalized banks and the Bank of Ghana, the study employs the Ordinary Least Squares (OLS) technique. The findings reveal that capital adequacy ratio and bank size significantly boost profitability, inflation positively impacts it, and the monetary policy rate has a negative effect. The study recommends that the Bank of Ghana increase regulatory capital requirements and keep the policy rate low to enhance bank stability and profitability.

Suggested Citation

  • Abdulai, Shirazu Kuvidana & Umar, Siisu, 2022. "The Impact of Capital Adequacy and Bank Size on Profitability of Ghanaian Banks," MPRA Paper 122478, University Library of Munich, Germany, revised 2022.
    • Handle: RePEc:pra:mprapa:122478
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Capital adequacy; Bank size; Return on asset; ordinary least squares; Ghana;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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