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Banks Performance in Ghana: Trends and Determinants


Paul Kwame Nkegbe
Y Ustarz

Abstract

The paper examines determinants of banks performance in the Ghanaian banking industry for the period  2000-2010 using trend graphs, equations and panel data estimation techniques. Three different measures of  performance are employed and the results show a negative trend in banks performance within the study  period. This observation is worrying due to the crucial role banks play in the economy. On the determinants,  market share of loan is found to be positively related to performance, confirming the relative market power  hypothesis. The results further reveal that banks in Ghana pass on their inefficiencies to their customers by  raising their lending rates and lowering their deposit rates. The findings have some policy implications: banks  should reduce the level of administrative overheads instead of passing their inefficiencies to their customers, as this has the effect of reducing the amount of credit customers would take for economic activities.

Keywords: Structure-Conduct-Performance Hypothesis, Market Power Theory, Return on Assets, Return on Equity, Net Interest Margin


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eISSN: 0855-6768
print ISSN: 0855-6768