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Examining the relationship between financial performance indicators and capitalization ratios: Analysis of Ghana's banking sector Owusu, Caleb Kwasi; Garr, David Kwashie
International Journal of Financial, Accounting, and Management Vol. 6 No. 3 (2024): December
Publisher : Goodwood Publishing

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.35912/ijfam.v6i3.2594

Purpose: This study examines the relationship between the capitalization ratio and business profitability, particularly its effect on return on assets (ROA) and return on equity (ROE). Capitalisation is crucial for financial growth and operational stability; however, an imbalance in the capital structure can adversely affect profitability. This study examines the essential issue of optimising capitalisation to improve firm performance, particularly under fluctuating economic conditions. Method: This study employs a quantitative research approach to analyse firm-level data and to examine the relationship between capitalisation and profitability, with E-veiw as the analytical tools for regression analysis. The results indicate that elevated capitalisation ratios correlate with diminishing profitability and lower equity returns, highlighting the danger of excessive leverage. Overreliance on debt financing increases financial and operational risks, restricts liquidity, and reduces shareholders’ net returns. Results: This research provides practical recommendations for corporate executives and governments. Businesses are urged to use balanced capital structures to improve financial flexibility and secure sustainable returns. Policymakers must strengthen regulatory frameworks to promote prudent financial management and mitigate the dangers linked to excessive debt financing. Contribution: This study contributes to the literature by offering empirical information regarding the relationship between capitalization and profitability, specifically in emerging markets. The work's novelty is in its concrete advice that links academic frameworks to practical financial strategies.

The Effect of Macroeconomic and Bank-Specific Factors on the Level of Non-Performing Loans in Ghana: Panel Data Regression Analysis Okine, Abraham Nii Adu; Garr, David Kwashie
Ilomata International Journal of Tax and Accounting Vol. 5 No. 3 (2024): July 2024
Publisher : Yayasan Ilomata

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.61194/ijtc.v5i3.1733

Non-performing loans has posed persistent challenge in Ghana impacting negatively on financial stability and economic growth. Studies have been conducted on NPLs focusing on external factors. However, the real impact of internal determinants has not been explored in the Ghanaian context. This work investigates the effect of macroeconomic and bank-specific variables on NPLs in the Ghana, using existing data from published financial reports of nine firms from 2008 to 2021. This study focuses on NPLs as proxies for the dependent variable, while GDP growth rate, bank’s size, capital adequacy, and unemployment are used as predictor variables. The random effects technique was employed for examination using Ordinary Least Squares. The discoveries prove that GDP has insignificant negative influence on NPLs, whilst bank size and capital adequacy have positive and statistically significant effect on NPLs. Again, unemployment has statistically significant effect on NPLs and bank performance. Banks need to strengthen credit risk management frameworks, particularly for larger institutions, and refine the capital adequacy strategies to align with actual risk exposure. This calls for regulators to adjust capital requirements and explore employment support mechanisms to mitigate the complex relationship between unemployment and NPLs, ensuring that policies are tailored to suit local conditions.

An Assessment of Capital Structure Influencing on Profitability: A Case of Listed Banks on the Ghana Stock Exchange owusu, Caleb Kwasi; Garr, David Kwashie; Awadzie, David Mensah
International Journal of Business, Management and Economics Vol. 4 No. 4 (2023): International Journal of Business, Management and Economics
Publisher : Training & Research Institute - Jeramba Ilmu Sukses (TRI-JIS)

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.47747/ijbme.v4i4.1455

This study aimed to examine the impact of capital structure on bank performance using data from nine listed banks on the Ghana Stock Exchange. The study utilised secondary panel data extracted from the published financial statements of these banks. Bank performance was measured using return on assets and return on equity as proxies, while the ratio of total debt to total assets served as the independent variable. Additionally, firms' age, size, and liquidity were control variables. The random effect technique was used for analysis, employing Ordinary Least Squares (OLS) and Autoregressive methods. The results indicated a positive and significant relationship between total debt to total assets, return on assets and equity. Furthermore, firms' age positively and significantly impacted the return on assets and return on equity in both models. Interestingly, the study found a negative effect of firms' liquidity on return on assets in model one, while the size of the firms had no impact on bank performance. Policymakers can encourage financial institutions to provide accessible and affordable lending options to businesses, enabling them to leverage debt effectively. This can be particularly beneficial for small and medium-sized enterprises (SMEs) that often face challenges accessing capital.

A Corporate Governance Dynamics and Financial Performance: Analysis of Listed Commercial Banks in the Ghanaian Context" OWUSU, CALEB KWASI; Garr, David Kwashie
International Journal of Business, Management and Economics Vol. 5 No. 2 (2024): International Journal of Business, Management and Economics
Publisher : Training & Research Institute - Jeramba Ilmu Sukses (TRI-JIS)

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.47747/ijbme.v5i2.1758

This study aims to determine the effect of corporate governance on the financial performance of 14 listed commercial banks in Ghana. The research employs a panel data set from 2008 to 2020 to examine how board size, ownership structure, board independence, capital adequacy ratio, audit committee effectiveness, board gender diversity, and overall corporate governance score affect ROA and ROE for banks. These relationships are analyzed using Ordinary Least Squares (OLS) regression within the framework of panel data analysis. Results indicate that ROA is positively related to board size, board independence, audit committee, and Board gender diversity. Also, ROE is positively influenced by companies’ ownership structure, capital adequacy ratio, audit committee effectiveness, and overall corporate employment governance rating. However, there is a significant negative correlation between ROE and women’s representation or board gender diversity. Also, another key finding is that both Return on Assets (ROA) and Return on Equity (ROE) are significantly affected by debt and debt-to-equity ratios. This indicates that banks borrowing more have reduced profitability, underlining the need for a well-managed capital structure and no over-reliance on loans. This study contributes to the understanding of the relationship between corporate governance and performance in the banking sector of Ghana, emphasizing that high-quality governance systems can improve and enhance financial performance. The insight gained from this analysis shows that Banks should aim towards good corporate governance practices such as; maintaining proper board size, promoting greater board independence, ensuring efficient audit procedures, and encouraging more gender diversity to enhance profitability. The outcomes also emphasized a well-built base of capital and concentrated ownership, enabling better financial results.The outcomes of this research are useful to Ghanaian policymakers, regulators, and bank executives who view the need for strong corporate governance environments to buttress the stability and growth of the banking sector.

Examining the relationship between financial performance indicators and capitalization ratios: Analysis of Ghana's banking sector Owusu, Caleb Kwasi; Garr, David Kwashie
International Journal of Financial, Accounting, and Management Vol. 6 No. 3 (2024): December
Publisher : Goodwood Publishing

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.35912/ijfam.v6i3.2594

Purpose: This study examines the relationship between the capitalization ratio and business profitability, particularly its effect on return on assets (ROA) and return on equity (ROE). Capitalisation is crucial for financial growth and operational stability; however, an imbalance in the capital structure can adversely affect profitability. This study examines the essential issue of optimising capitalisation to improve firm performance, particularly under fluctuating economic conditions. Method: This study employs a quantitative research approach to analyse firm-level data and to examine the relationship between capitalisation and profitability, with E-veiw as the analytical tools for regression analysis. The results indicate that elevated capitalisation ratios correlate with diminishing profitability and lower equity returns, highlighting the danger of excessive leverage. Overreliance on debt financing increases financial and operational risks, restricts liquidity, and reduces shareholders’ net returns. Results: This research provides practical recommendations for corporate executives and governments. Businesses are urged to use balanced capital structures to improve financial flexibility and secure sustainable returns. Policymakers must strengthen regulatory frameworks to promote prudent financial management and mitigate the dangers linked to excessive debt financing. Contribution: This study contributes to the literature by offering empirical information regarding the relationship between capitalization and profitability, specifically in emerging markets. The work's novelty is in its concrete advice that links academic frameworks to practical financial strategies.

The Moderating Role of Institutional Quality on the Nexus Between NPL and Performance Metrics of ROE, ROA and CAR Okine (Rev), Abraham; Garr, David Kwashie
Ilomata International Journal of Tax and Accounting Vol. 6 No. 4 (2025): October 2025
Publisher : Yayasan Ilomata

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.61194/ijtc.v6i4.1930

The study explores the moderating effect of institutional quality (INSTQ) on the nexus amongst NPLs and bank performance in Ghana. Employing fixed-effects panel data from 2007 to 2021, and controlling for unobserved heterogeneity, the study offered robust insights into credit risk forces in a developing economy. The discoveries disclose a contradictory positive, and substantial relationship between NPLs and ROA and CAR. However, the influence of NPLs on ROE was positive, but not statistically substantial. Institutional quality exerted direct and significant influence on ROA, ROE and CAR. The interface term operating between NPLs and institutional quality is negative, demonstrating that INSTQ effectively decreases the influence of NPL on performance. Thus, the effects of NPLs on performance are significantly reduced in environments with stronger institutional qualities. While inflation rate shows negative and insignificant relationship with performance, GDP growth is positively related to ROE, albeit insignificant for ROA and CAR. The originality of this study lies in its empirical demonstration of the controlling role of INSTQ in an emerging economy. These findings have significant policy implications, underscoring the need to strengthen regulatory institutions and credit risk governance. Future research needs deeper investigation into the specific disaggregated dimensions of institutional quality and the impacts on performance.

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