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Corporate Governance and Efficiency of Rural and Community Banks (RCBs) in Ghana

Author

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  • Eric Fosu Oteng-Abayie

    (Department of Economics, Kwame Nkrumah University of Science and Technology, Ghana)

  • Anthony Affram

    (School of Business, Kwame Nkrumah University of Science and Technology, Ghana)

  • Henry Kofi Mensah

    (School of Business, Kwame Nkrumah University of Science and Technology, Ghana)

Abstract

Corporate governance crises that occur in the banking sector normally cripple economies and bring many hardships to individuals, corporate entities, communities, and the nation at large. In this study, we sought to examine the level of technical efficiency and productivity growth of rural and community banks (RCBs) and the impact of corporate governance indicators on the RCBs' efficiency performance in Ghana. A sample of 70 out of 140 RCBs was selected based on the ARB Apex Bank's performance ratings and data availability. Data envelopment analysis (DEA) was used to determine the technical efficiency scores of the selected RCBs. In the second stage of the analysis, these computed efficiency scores were regressed on the corporate governance variables to assess the effects of the latter. The findings from the DEA approach show that 11% to 20% of the sampled RCBs in Ghana operate close to the efficiency frontier, whereas the majority - about 65% to 81% - underperformed within the study period of 2007 to 2013. The study further established that the number of board members, frequency of board meetings, and corporate social responsibility have significant influence on RCB efficiency.

Suggested Citation

  • Eric Fosu Oteng-Abayie & Anthony Affram & Henry Kofi Mensah, 2018. "Corporate Governance and Efficiency of Rural and Community Banks (RCBs) in Ghana," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 3(2), pages 93-118, December.
    • Handle: RePEc:sgh:erfinj:v:3:y:2018:i:2:p:93-118
    DOI: 10.33119/ERFIN.2018.3.2.2
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    More about this item

    Keywords

    data envelopment analysis; technical efficiency; corporate governance; rural banks; Ghana;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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