IMPACT OF NON-PERFORMING LOANS ON BANK PROFITABILITY: EMPIRICAL EVIDENCE FROM COMMERCIAL BANKS IN GHANA
This study examined the influence of non-performing loans on Ghana commercial banks’ profitability in the 2009–2018 period. The factors that explain the NPL contain very essential information for banks. The results indicate that the effect of non-performing loans on profitability is not statistical...
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| Format: | Article |
| Language: | English |
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Gdańsk University of Technology
2022-05-01
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| Series: | Research on Enterprise in Modern Economy Theory and Practice |
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| Online Access: | https://journal.mostwiedzy.pl/reme/article/view/2608 |
| _version_ | 1818005683371507712 |
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| author | Dramani Angsoyiri |
| author_facet | Dramani Angsoyiri |
| author_sort | Dramani Angsoyiri |
| collection | DOAJ |
| description |
This study examined the influence of non-performing loans on Ghana commercial banks’ profitability in the 2009–2018 period. The factors that explain the NPL contain very essential information for banks. The results indicate that the effect of non-performing loans on profitability is not statistically significant: operating expense efficiency and return on equity, have a positive and statistically significant relationship with profitability. The sample consisted of the banking sector (commercial banks) in the 2009–2018 period. The factors include return on assets as a function of the ratio of non-performing loans, credit risk, exchange rate, inflation, unemployment, and bank size as a control variable. The estimation was done by regression using multivariate linear regression through SPSS software. The study considered limited banking indicators as determinants of non-performing loans and was limited to the specific 2009–2018 time frame. The regression results indicate that bank profitability is strongly impacted by the increase in non-performing loans. The multivariate linear regression shows that profitability has a positive insignificant influence on non-performing loans. On the other hand, operating expense efficiency and return on equity have a positive and statistically significant relationship with profitability. Hence, when the banking sector’s expenses are higher as compared to its revenue, the banks’ overall profit would be low, impacting non-performing loans of the banks. The operating expenses should therefore be maintained as low as possible.
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| first_indexed | 2024-04-14T04:48:25Z |
| format | Article |
| id | doaj.art-9c2163357f874e8a9c63bd2754149a44 |
| institution | Directory Open Access Journal |
| issn | 2084-6495 |
| language | English |
| last_indexed | 2024-04-14T04:48:25Z |
| publishDate | 2022-05-01 |
| publisher | Gdańsk University of Technology |
| record_format | Article |
| series | Research on Enterprise in Modern Economy Theory and Practice |
| spelling | doaj.art-9c2163357f874e8a9c63bd2754149a442022-12-22T02:11:23ZengGdańsk University of TechnologyResearch on Enterprise in Modern Economy Theory and Practice2084-64952022-05-0123310.19253/reme.2021.02.002IMPACT OF NON-PERFORMING LOANS ON BANK PROFITABILITY: EMPIRICAL EVIDENCE FROM COMMERCIAL BANKS IN GHANADramani Angsoyiri0Kwame Nkrumah University of Science and Technology This study examined the influence of non-performing loans on Ghana commercial banks’ profitability in the 2009–2018 period. The factors that explain the NPL contain very essential information for banks. The results indicate that the effect of non-performing loans on profitability is not statistically significant: operating expense efficiency and return on equity, have a positive and statistically significant relationship with profitability. The sample consisted of the banking sector (commercial banks) in the 2009–2018 period. The factors include return on assets as a function of the ratio of non-performing loans, credit risk, exchange rate, inflation, unemployment, and bank size as a control variable. The estimation was done by regression using multivariate linear regression through SPSS software. The study considered limited banking indicators as determinants of non-performing loans and was limited to the specific 2009–2018 time frame. The regression results indicate that bank profitability is strongly impacted by the increase in non-performing loans. The multivariate linear regression shows that profitability has a positive insignificant influence on non-performing loans. On the other hand, operating expense efficiency and return on equity have a positive and statistically significant relationship with profitability. Hence, when the banking sector’s expenses are higher as compared to its revenue, the banks’ overall profit would be low, impacting non-performing loans of the banks. The operating expenses should therefore be maintained as low as possible. https://journal.mostwiedzy.pl/reme/article/view/2608non-performing loanscredit riskcommercial banks |
| spellingShingle | Dramani Angsoyiri IMPACT OF NON-PERFORMING LOANS ON BANK PROFITABILITY: EMPIRICAL EVIDENCE FROM COMMERCIAL BANKS IN GHANA Research on Enterprise in Modern Economy Theory and Practice non-performing loans credit risk commercial banks |
| title | IMPACT OF NON-PERFORMING LOANS ON BANK PROFITABILITY: EMPIRICAL EVIDENCE FROM COMMERCIAL BANKS IN GHANA |
| title_full | IMPACT OF NON-PERFORMING LOANS ON BANK PROFITABILITY: EMPIRICAL EVIDENCE FROM COMMERCIAL BANKS IN GHANA |
| title_fullStr | IMPACT OF NON-PERFORMING LOANS ON BANK PROFITABILITY: EMPIRICAL EVIDENCE FROM COMMERCIAL BANKS IN GHANA |
| title_full_unstemmed | IMPACT OF NON-PERFORMING LOANS ON BANK PROFITABILITY: EMPIRICAL EVIDENCE FROM COMMERCIAL BANKS IN GHANA |
| title_short | IMPACT OF NON-PERFORMING LOANS ON BANK PROFITABILITY: EMPIRICAL EVIDENCE FROM COMMERCIAL BANKS IN GHANA |
| title_sort | impact of non performing loans on bank profitability empirical evidence from commercial banks in ghana |
| topic | non-performing loans credit risk commercial banks |
| url | https://journal.mostwiedzy.pl/reme/article/view/2608 |
| work_keys_str_mv | AT dramaniangsoyiri impactofnonperformingloansonbankprofitabilityempiricalevidencefromcommercialbanksinghana |