IDEAS home Printed from https://ideas.repec.org/a/mth/ber888/v9y2019i4p23-52.html
   My bibliography  Save this article

Impact of Financial Risk Indicators on Banks' Financial Performance in Ghana

Author

Listed:
  • Tan Zhongming
  • Samuel Frimpong
  • Ding Guoping

Abstract

This research is to study the impact of some financial risk indicators on fifteen selected commercial banks' in Ghana. The indication from the augmented Dickey-Fuller unit root test results show that the data series after first difference at the first order achieved stationarity. The analysis of the data revealed the existence of significant long run relationship between bank financial performance and the variables of financial risk in the banking sector. The granger causality test results reveal that there is unidirectional causality flowing from the variables of financial risk This suggest that the indicators of financial risk strongly and actively stimulate and improve the financial performance of banks in Ghana. The study recommends that bank managers should improve on the management of all the indicators of financial risk variables in order to improve on the achievement of the objective of the firm.

Suggested Citation

  • Tan Zhongming & Samuel Frimpong & Ding Guoping, 2019. "Impact of Financial Risk Indicators on Banks' Financial Performance in Ghana," Business and Economic Research, Macrothink Institute, vol. 9(4), pages 23-52, December.
    • Handle: RePEc:mth:ber888:v:9:y:2019:i:4:p:23-52
    as

    Download full text from publisher

    File URL: http://www.macrothink.org/journal/index.php/ber/article/view/15575/12177
    Download Restriction: no
    File URL: http://www.macrothink.org/journal/index.php/ber/article/view/15575
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Athanasoglou, Panayiotis P. & Brissimis, Sophocles N. & Delis, Matthaios D., 2008. "Bank-specific, industry-specific and macroeconomic determinants of bank profitability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 121-136, April.
    2. Bikker, J.A. & Metzemakers, P.A.J., 2005. "Bank provisioning behaviour and procyclicality," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(2), pages 141-157, April.
    3. Rudra Sensarma & M. Jayadev, 2009. "Are bank stocks sensitive to risk management?," Journal of Risk Finance, Emerald Group Publishing, vol. 10(1), pages 7-22, January.
    4. Viral V. Acharya & Iftekhar Hasan & Anthony Saunders, 2006. "Should Banks Be Diversified? Evidence from Individual Bank Loan Portfolios," The Journal of Business, University of Chicago Press, vol. 79(3), pages 1355-1412, May.
    5. M. Idrees Khawaja & Musleh-Ud Din, 2007. "Determinants of Interest Spread in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 46(2), pages 129-143.
    6. Matthew Sackett & Sherrill Shaffer, 2006. "Substitutes versus complements among credit risk management tools," Applied Financial Economics, Taylor & Francis Journals, vol. 16(14), pages 1007-1017.
    7. George A. Akerlof & Ross D. Milbourne, 1980. "Irving Fisher on His Head II: The Consequences of the Timing of Payments for the Demand for Money," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 95(1), pages 145-157.
    8. D Wu & D L Olson, 2010. "Enterprise risk management: coping with model risk in a large bank," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(2), pages 179-190, February.
    9. René M. Stulz, 1996. "Rethinking Risk Management," Journal of Applied Corporate Finance, Morgan Stanley, vol. 9(3), pages 8-25, September.
    10. Vincent Okoth Ongore & Gemechu Berhanu Kusa, 2013. "Determinants of Financial Performance of Commercial Banks in Kenya," International Journal of Economics and Financial Issues, Econjournals, vol. 3(1), pages 237-252.
    11. Charles R. Plott & Kathryn Zeiler, 2007. "Exchange Asymmetries Incorrectly Interpreted as Evidence of Endowment Effect Theory and Prospect Theory?," American Economic Review, American Economic Association, vol. 97(4), pages 1449-1466, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Huaiwen ZHANG & Adnan Khurshid & Xinyu WANG & Alina Mirela BĂLTĂŢEANU, 2021. "Corporate Financial Risk Assessment and Role of Big Data; New Perspective Using Fuzzy Analytic Hierarchy Process," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 181-199, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eric Kofi Boadi & Eric Kofi Boadi & Yao Li & Victor Curtis Lartey & Victor Curtis Lartey, 2016. "Role of Bank Specific, Macroeconomic and Risk Determinants of Banks Profitability: Empirical Evidence from Ghana's Rural Banking Industry," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 813-823.
    2. Baah Aye Kusi & Lydia Adzobu & Alex Kwame Abasi & Kwadjo Ansah-Adu, 2020. "Sectoral Loan Portfolio Concentration and Bank Stability: Evidence from an Emerging Economy," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 19(1), pages 66-99, April.
    3. Paul Munene Muiruri & Florence S. Memba & Agnes Njeru, 2015. "Moderating Effects of Bank Ownership on the Relationship between Securitization Uptake and Financial Performance of Commercial Banks in Kenya," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 1(2), pages 24-43, June.
    4. Boubakri, Narjess & Mirzaei, Ali & Samet, Anis, 2017. "National culture and bank performance: Evidence from the recent financial crisis," Journal of Financial Stability, Elsevier, vol. 29(C), pages 36-56.
    5. Vighneswara Swamy, 2017. "Determinants of Bank Asset Quality and Profitability: An Empirical Assessment," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 63(1), pages 97-135.
    6. Stéphane Albert & Hervé Alexandre, 2018. "Banks’ earnings: Empirical evidence of the influence of economic and financial market factors," Review of Financial Economics, John Wiley & Sons, vol. 36(2), pages 97-116, April.
    7. Maria Elisabete Duarte Neves & Maria Do Castelo Gouveia & Catarina Alexandra Neves Proença, 2020. "European Bank’s Performance and Efficiency," JRFM, MDPI, vol. 13(4), pages 1-17, April.
    8. Pejman Ebrahimi & Maria Fekete-Farkas & Parisa Bouzari & Róbert Magda, 2021. "Financial Performance of Iranian Banks from 2013 to 2019: A Panel Data Approach," JRFM, MDPI, vol. 14(6), pages 1-15, June.
    9. Ozili, Peterson, K, 2016. "Bank Profitability and Capital Regulation: Evidence from Listed and non-Listed Banks in Africa," MPRA Paper 75856, University Library of Munich, Germany.
    10. Mosab I. Tabash & Eissa A. Al-Homaidi & Anwar Ahmad & Najib H.S. Farhan, 2020. "Factors affecting financial performance of Indian firms: an empirical investigation of firms listed on Bombay Stock Exchange," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 13(2), pages 152-172.
    11. Malgorzata A. Olszak & Mateusz Pipien, 2013. "Cross country linkages as determinants of procyclicality of loan loss provisions – empirical importance of SURE specification," Faculty of Management Working Paper Series 22013, University of Warsaw, Faculty of Management.
    12. J.A. Bikker & Tobias M. Vervliet, 2017. "Bank Profitability and Risk-Taking under Low Interest Rates," Working Papers 17-10, Utrecht School of Economics.
    13. Khanh Ngoc Nguyen, 2019. "Revenue Diversification, Risk and Bank Performance of Vietnamese Commercial Banks," JRFM, MDPI, vol. 12(3), pages 1-21, August.
    14. Atahau, Apriani Dorkas Rambu & Cronje, Tom, 2020. "Bank lending: The bank ownership focus in the pre- and post-global financial crisis periods," Economic Systems, Elsevier, vol. 44(4).
    15. Gathuru Edmund Kanyugi & Patrick Gudda & Maurice Ombok & Patrick Kibati, 2019. "Banking Agency Adoption and its Effect on Banks Deposits of Commercial Banks in Kenya," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 9(3), pages 251-263, July.
    16. Ozili, Peterson K, 2018. "Banking Stability Determinants in Africa," MPRA Paper 101825, University Library of Munich, Germany.
    17. Małgorzata Olszak & Mateusz Pipień & Iwona Kowalska & Sylwia Roszkowska, 2017. "What Drives Heterogeneity of Cyclicality of Loan-Loss Provisions in the EU?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 51(1), pages 55-96, February.
    18. Okoli, Chukwudi Francis & Ifurueze, Meshack S & Nweze, Augustine U., 2020. "Liquidity and Performance of Deposits Money Banks in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 4(10), pages 212-222, October.
    19. Olszak, Małgorzata & Pipień, Mateusz & Kowalska, Iwona & Roszkowska, Sylwia, 2014. "What drives heterogeneity of loan loss provisions’ procyclicality in the EU?," MPRA Paper 56834, University Library of Munich, Germany.
    20. Okoli, Chukwudi Francis & Ifurueze, Meshack S & Nweze, Augustine U., 2020. "Non-Performing Loans and Performance of Deposits Money Banks in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 4(10), pages 201-211, October.

    More about this item

    Keywords

    Augmented Dickey-Fuller unit root test; Granger causality test; Financial performance;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mth:ber888:v:9:y:2019:i:4:p:23-52. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Technical Support Office (email available below). General contact details of provider: http://www.macrothink.org/journal/index.php/ber .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.