Economics, Econometrics and Finance
6 years ago

High non-performing loans in Ghanaian banks linked to lower profitability.

European Journal of Business and Management
Re-Examining the Impact of Credit Risk on Profitability of Banks:Panel Evidence from Ghana
Evans Opoku‐Mensah, Jemimah Nyakum, Lydia Nyankomtakyi, Sandra Asantewaa Ampofo

Paper Summary

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Credit risk can impact the profitability of banks in Ghana. A study looked at data from 20 banks between 2010-2015. They found that poor asset quality and high non-performing loans lead to lower profitability. However, the liquidity ratio did not have a significant impact on profitability. Banks with many non-performing loans are less profitable and at risk of insolvency. It is recommended that banks improve their credit risk management to boost profitability.