An assessment of liquidity risk among listed commercial banks in Ghana
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Date
JUNE 2015
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Abstract
The aim of the current study was to explore the liquidity risk of four listed banks. Specifically, the current study intended to evaluate the influence of predictors such as bank size on liquidity risk and also assess the liquidity risk of the chosen banks over a time of ten years. The study used panel data from the four commercial and listed banks in Ghana spanning the period 2002 to 2011. The financial gap ratio (FGAPR) and the net loans to total deposits (NLD) ratio (dependent variables) were used to evaluate liquidity risk among the banks. The panel data was analysed to evaluate the strength of association between these ratios and predictors of bank liquidity (independent variables), i.e., bank size, bank concentration, bank ownership, risky and less risky liquid assets, non-deposits dependence, and inflation. The panel data regression results have revealed that bank size, the rate of inflation and non-deposit dependence had a positive and a statistically significant relationship with liquidity risk while liquid assets and bank concentration in the industry show a negatively significant relationship with bank liquidity risk. The study recommends among other things, that banks in Ghana place particular importance into monitoring the indicators and determinants that were identified to impact liquidity positively or adversely, i.e., the size of the bank, the components of liquid assets which may be either risky or less risky liquid assets, non-deposit dependence, industry concentration and the change in inflation. The study further recommends a yearly update of liquidity risk assessment in light of the burgeoning competition among banks in Ghana and as a follow up, the study also suggests measuring how liquidity risk relates or impacts on profitability among these listed banks
Description
A Thesis submitted to the Department of Accounting and Finance, Kwame Nkrumah University of Science and Technology in partial fulfilment of the requirements for the degree of Master of Business Administration (Finance Option)