Determinants and Performance of Non-Performing Loans of Selected Commercial Banks in Ghana
Posted: 29 May 2020
Date Written: September 15, 2018
Abstract
Non-performing loan had been a challenge of banks in Ghana and its impact on their asset quality is very challenging. This study examined the determinants of non-performing loans and their impact on profitability of banks and capital adequacy of banks. The study adopted three specific research objectives which were to examine the determinants of non-performing loans of commercial banks, examine the effect of non-performing loans on the profitability of the selected commercial banks in Ghana and examine the effect of non-performing loans on the capital adequacy of the selected commercial banks. The study adopted a quantitative research approach and used pooled ordinary least square regression as the estimation technique. The study used Pearson correlation test to test the association of the variables and it was found that non-performing loans and profitability have negative relationship and very significant. It was revealed that non-performing loans have negative and significant relationship with capital adequacy. The study further revealed that inflation rate, economic growth, risk tolerance of banks, loan growth, management quality and size were major determinants of non-performing loans and very significant.
Keywords: Non-Performing, Loans, Inflation Rate, Economic Growth, Risk Tolerance, Capital Adequacy, Currency, Depreciation, Profitability of Banks, Risk-Weighted Assets
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