Bank’s efficiency and non-performing loans in commercial banks in ghana

No Thumbnail Available
Journal Title
Journal ISSN
Volume Title
Banks efficiency and non-performing loans are very important for banks operational efficiency, stability and monetary expansion. Banks play an important role in credit payments scheme plus the spread of fiscal policy. The main objective of the study is to investigate banks’ efficiency and non-performing loans of commercial banks in Ghana. Specifically, the study set the following objectives. To find out what bank-specific and macroeconomic factors played in banks’ efficiency and non-performing loans of Ghana’s banking sector. To find out the determinants of banks efficiency in Ghana. To find out the effects of non-performing loans on banks efficiency of commercial banks in Ghana. The data used for the study were obtained from the annual reports of some selected Ghanaian commercial banks from 2010 to 2020. The records for these observations are balanced panel data of 13 banks in the entire span of the study of annual observations for nine years summing up to a total of 143 data observations within the period under study. This research in banks efficiency is very informative and necessary to regulators, policy makers and bank management after the sector has undergone the recent recapitalization. The results exhibited low efficiency of banks, which is a reflection of the high financial and operational costs. Based on the empirical evidence, the study concluded that non-performing loan and capital have negative effect on the efficiency of banks in Ghana. Bank size also has positive and significant effect on bank efficiency. Non-performing loans affect the valuations and profitability of banks. Lending interest rate are usually high in order to compensate for the high risk of borrowing. The study recommended that, management should implement policies and regulations that should provide screening of borrowers to reduce the moral hazard and adverse selection to reduce financial loss. Also, banks in Ghana should desist from aggressive lending to customers as a way of competing for customers to reduce the loan default.
A thesis submitted to kunst school of business, department of accounting and finance, in partial fulfillment for the degree of master of business administration in finance