Board characteristics, asset quality, and firm profitability: evidence from the ghanaian banking sector

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Following the collapse of giant institutions such as Enron and worldcom, the concept of corporate governance began to exasperate the interest of scholars, academicians, and major stakeholders who have invested their hard-earned money in companies. Likewise, in the Ghanaian context, the collapse of many banks as well as the revocation of the license of many financial institutions are attributed to the issues of corporate governance. For this reason, the current study analysed board characteristics, asset quality, and profitability of banks in Ghana. Data was collected from the annual reports of 11 banks spanning from 2015 to 2020. From the results, the study found a significant positive relationship between asset quality and board size, board independence and board meetings among banks in Ghana. Furthermore, it was found that there is a strong positive relationship between asset quality and the profitability of banks in Ghana. Based on these findings, the study recommended banks should consider expanding their board of directors to include a diverse range of individuals with expertise in different areas of finance and asset management, which can contribute to better decision-making and ultimately enhance asset quality. Moreover, it was recommended that banks should establish robust monitoring mechanisms to evaluate and assess asset quality continuously. This will enable the board to identify any potential issues or areas for improvement and take appropriate actions in a timely manner. Finally, it is crucial for banks to prioritize maintaining a strong and healthy asset portfolio by effectively managing credit risk, minimizing non-performing assets, and ensuring regular audits and evaluations of asset quality.
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 award of master of business administration (finance)