The effect of credit risk management on performance of listed banks in ghana

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The whole business model of the banking industry is premised on risks taking. Therefore, credit risk management is a core priority for commercial banks. Using secondary data from the nine GSE-listed banks, the research explored how credit risk management affects bank performance in Ghana. The banks' panel data was from 2009 through 2020. Risk management was monitored by NPL and CAR, while bank performance was measured by ROA and ROE. The POLS, FE, and RE models were given for both dependent variables. The POLS, FE, and RE models indicated that NPL adversely affected bank performance. In all models, the Capital Adequacy ratio (CAR) did not affect bank performance statistically. Bank leverage was favourably correlated with bank performance (ROA as the proxy) but nonsignificant when ROE was the dependent variable. The POLS model was used to quantify the effect of the COVID-19 epidemic on bank NPL. COVID19 was shown to positively correlate with NPL, indicating that named banks' NPL grows with its duration. Trend study indicated that bank NPL rose significantly between 2019 and 2020 owing to the pandemic. The Hausman test picked RE above POLS and FE as the consistent model. The report suggests that banks use real-time technology and professional credit risk committee directors to evaluate loan applicants' creditworthiness before giving loans. Therefore, future studies should consider investigating the influence of the credit risk committee and digitization on banks' credit risk levels (NPL) as well as their performance.
A thesis submitted to the department of Human Resource and Organizational Development, College of Humanities and Social Science KNUST in partial fulfilment of the requirement for the degree of Master of Science in Accounting and Finance.