The effect of corporate governance on credit risk management
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Date
2023
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KNUST
Abstract
The study sought to examine the effect of corporate governance on credit risk management in listed banks in Ghana to provide evidence that would inform policy decisions. The study adopts a positivist approach, employing a correlational descriptive research design to explore this link. The population of interest comprises all nine listed banks in Ghana from 2010 to 2021. The research utilises secondary data from annual reports. Secondary data collected from the GSE was analysed using R software. The findings underscore the pivotal role that these governance factors play in shaping the banks' risk management strategies. A larger board size was associated with improved credit risk management, benefiting from enhanced monitoring and diverse expertise. The presence of non-executive board members positively influenced credit risk management by providing impartial evaluation, specialised skills, and external perspectives. Similarly, the inclusion of female board members contributed positively to credit risk management, capitalising on gender diversity's potential to enhance decision-making and risk assessment. These findings have theoretical implications. The study contributes to agency theory by affirming that a larger board size can mitigate agency problems and enhance risk oversight. Stewardship theory is supported by highlighting the collective responsibility of non-executive directors in safeguarding the bank's interests through effective credit risk management. Moreover, the study aligns with recommendations from regulatory frameworks and governance guidelines that emphasise the importance of diverse and balanced board compositions to enhance risk management practices. Recomemdation and directions for further studies are provided.
Description
A thesis submitted to the department of accounting and finance, school of business, kwame nkrumah university of science and technology, kumasi in partial fulfilment of the requirements for the award degree of masters of science in accounting and finance