Asset Liability Management and the Profitability of Listed Banks in Ghana

Abstract

The purpose of this paper is to assess the impact of asset and liability management on the profitability of listed banks in Ghana. Multiple linear regression has been applied by taking ROA as the dependent variable, and TAS (the total asset) and TLT (the total liability) representing the asset and liability mix of the banks as the independent variables together with gross domestic product and interest rates also representing the economic factors. The model used in this study hypothesized that the rate of return on earning assets is positive, and the rate of cost on liabilities is negative. The robust panel regression analysis with random effect result showed that total assets affects profitability positively, while total liabilities mainly saving and fixed deposits and other liabilities and credit balances have significant and negative effect on commercial banks profitability. With regard to the macroeconomic variables, interest rate had no significant effect on commercial banks profitability. As a result, the study recommends that commercial banks should focus on increasing public awareness to mobilize more savings and fixed deposits and this will enhance their performance in their provision of loans and advances to customers.

Keywords: Assets, Liability, Profitability, ROA, Interest Rate, Ghana