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Financial Distress and Bankruptcy Prediction: Evidence from Ghana

Author

Listed:
  • Frederick ANISOM-YAANSAH

    (Ghana Technology University College, Ghana)

  • Kofi MINTAH OWARE

    (Kumasi Technical University, Ghana)

  • Solomon SAMANHYIA

    (Ghana Technology University College, Ghana)

Abstract

The frequent cases of corporate failures within the financial sector necessitates the need to employ models to predict forehand the financial distressed or bankruptcy state of the financial sector. This study aims at predicting financial distress and bankruptcy on selected listed banks on the stock exchange of a developing West African country, Ghana. Data used for the study spanned from 2008 to 2014. The Altman Z-Score and Boone Indicator were the main means of analysis. The study concluded that poor corporate governance contributes to financial distress and that smaller board size negatively affects corporate performance. The study also concludes that, in a high competitive industry, firms become more efficient and their performance enhanced and thus less likely to be financially distressed. Merging the listed banks indicates financial stability of listed banks albeit one distressed bank. Adoption of best corporate governance standards, enhancing competition through effective corporate strategies and the Central Bank ensuring that banks have enough deposit insurance funds in stock to mitigate the effect of bankruptcy are some of the policy suggestions from the study.

Suggested Citation

  • Frederick ANISOM-YAANSAH & Kofi MINTAH OWARE & Solomon SAMANHYIA, 2016. "Financial Distress and Bankruptcy Prediction: Evidence from Ghana," Expert Journal of Finance, Sprint Investify, vol. 4(1), pages 52-65.
  • Handle: RePEc:exp:finnce:v:4:y:2016:i:1:p:52-65
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    References listed on IDEAS

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    2. Mr. Gianni De Nicolo & John H. Boyd & Abu M. Jalal, 2006. "Bank Risk-Taking and Competition Revisited: New Theory and New Evidence," IMF Working Papers 2006/297, International Monetary Fund.
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    Cited by:

    1. Solomon SAMANHYIA & Kofi MINTAH OWARE & Frederick ANISOM-YAANSAH, 2016. "Financial Distress and Bankruptcy Prediction: Evidence from Ghana," Expert Journal of Finance, Sprint Investify, vol. 4, pages 52-65.

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    More about this item

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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