Investigating the Efficiency of Ghanaian banks before and after the minimum capital requirement increase

Obeng, Rosina (2013) Investigating the Efficiency of Ghanaian banks before and after the minimum capital requirement increase. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

Using SFA and a two-stage approach, this dissertation investigates the short-term impact of the recent increase in the minimum capital requirement on the cost and profit efficiency of Ghanaian banks over the period 2007-2012. The efficiency score obtained from the first stage are then utilized in the second stage to evaluate the determinants of Ghanaian bank efficiency.

From the first stage, the results show a general improvement in the cost and profit efficiency of Ghanaian banks over the study period. The study also found that the general assertion that the GFC had little impact on Ghanaian banks held only for cost efficiency as profit efficiency was indirectly affected. By employing two models, one with equity as a risk control variable and the other without, it was again confirmed that the inclusion of equity as a risk control variable is important for bank efficiency modelling. On the main research topic, the analysis revealed a consistent improvement in profit efficiency after the minimum capital increase while cost efficiency showed a mixed trend.

For the potential determinants of efficiency, high cost efficiency is associated with well-capitalized, highly liquid and large-sized banks in the Ghanaian banking industry whereas high profitability and a favourable macroeconomic environment tend to reduce cost efficiency. On the other hand, high profitability and favourable climate increase profit efficiency as a high ratio of non-performing loans, loans-to-assets ratio, size, industry concentration and FDI lowers profit efficiency. Finally, support is not found for the impact of corporate governance as well as the differences in the efficiency scores of foreign and local/domestic banks and listed and unlisted banks.

Item Type: Dissertation (University of Nottingham only)
Keywords: Cost Efficiency, Profit Efficiency, Technical Efficiency, Allocative Efficiency
Depositing User: EP, Services
Date Deposited: 07 Mar 2014 09:15
Last Modified: 24 Oct 2016 02:59
URI: http://eprints.nottingham.ac.uk/id/eprint/26475

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