Financial Distress Management and Financial Performance of Selected Rural Banks in Ashanti Region, Ghana

This study is motivated to investigate the rampant occurrence of Financial Distress in financial institutions over the past few years in Ghana which has led many Financial Institutions into bankruptcy and finally collapse. The increasing trend of this problem has to be curbed since Financial Institutions contribute immensely to the growth of the economy. The general objective of the study was to analyze the financial distress management and financial performance to enhance the financial performance of selected Rural Banks in the Ashanti region. The data obtained from respondents was analyzed employing Descriptive Statistics, Linear and Multiple Regression Analysis, and System Improvement Analysis. The results of the analysis concluded that: the sampled Rural Banks did not manage their financial distress effectively during the study period which resulted in their low Financial Performance; Except for Operational Efficiency; Capital Adequacy; Asset Quality; Liquidity; and Corporate Governance have a positive significant effect on Financial Distress Management; Financial Distress Management has a positive and significant effect on Financial Performance; and RCC-FP parameters introduced by the researcher, would have a strong, positive, and significant influence to improve Financial Performance and mitigate Financial Distress. It was also recommended that the Bank of Ghana should introduce a policy framework to embrace: Fit and Proper Test and Performance Contracts for all management staff; and the use of Credit Bureau and Credit Insurance to deal with Financial Distress to enhance Financial Performance.