Impact of Credit Risk on the Value of Universal Banks in Ghana
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Date
2023
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KNUST
Abstract
This paper investigates the impact of credit risk on the value of universal banks in Ghana. The general objectives of the study are to examine the trend of credit risk and also examine the relationship between credit risk, capital adequacy and the value of universal banks in Ghana. A quantitative survey is conducted with data obtained from the financial statement of 15 universal banks in Ghana from the period of 2007 to 2021. A total of 225 observations are analyzed in this study due to data availability and time constraint. Data collected are analyzed using multiple linear regression. The results of the study indicate that the trend of credit risk among universal banks in Ghana is a downwards one indicating an improvement in the management of credit risk among universal banks in Ghana. The study finds no evidence that universal banks in Ghana create value via Non-Performing Loans and capital adequacy. Hence, the study’s findings shows that regardless of a huge amount of unpaid loans, NPLs have a positive and insignificant impact on bank value, whereas capital adequacy has a negative and insignificant impact on bank value due to strict capital requirement regulations in the financial sector. Furthermore, firm value of universal banks in Ghana has significant relationship with Bank Size, Bank Age, and GDP.
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Dissertation submitted to the Department of Accounting and Finance of the School of Business, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirements for the award of the Master of Science Degree in Accounting and Finance