Assessment of Efficiency and Profitability of Listed Banks in Ghana

Abstract

The Ghanaian banking industry has had both good and bad times as far as profit is concerned. However, the industry remains good, as evidened from the rising number of other banks from the continent to either merge with the indigenous banks or take over the operation of some of the local banks. In this view this; the study assessed the efficiency and profitability of banks operating in Ghana by using listed banks between the years 2006 to 2011. This quantitative study employed panel data approach using regression analysis to assess the efficiency of banks operating on the Ghana Stock Exchange. The dependent variable is profitability, comprises of return on assets and the size of the firm. The independent variable efficiency also comprises leverage ratio, liquidity ratio, credit risk ratio and profitability ratio. The main source of data employed for this research is a secondary data. The study revealed that 60.74 percent of the variation or changes in the profitability of the banks are accounted for by the independent variables such as the liquidity level, leverage, productivity, credit risk and size of the banks. This was revealed by the coefficient of determination (R²) which shows the amount of variation in the dependent variable as being explained by the independent variables