Governance Deficits and Financial Fragility: An Analysis of Bank Failures in Ghana

Gabriel Osei Forkuo, Osei-Dwomoh Emmanuel and Joseph Kofi Nkuah

MPRA Paper from University Library of Munich, Germany

Abstract: This study explored the critical relationship between corporate governance practices and the incidence of bank failures in Ghana, a key issue for the nation's financial stability and economic resilience. While Ghana's banking sector has undergone significant modernization, recent high-profile bank failures have cast doubt on the effectiveness of existing governance and regulatory frameworks. This research quantitatively investigates how core governance factors—specifically board composition, risk management, and regulatory compliance—influence bank stability. Analyzing data from 30 banks, the study employs descriptive, correlation, and regression analyses to assess governance practices and their linkage to financial distress indicators. The findings reveal a significant relationship between board independence, robust risk management, regulatory compliance, and a reduced likelihood of bank failure. Notably, a higher proportion of independent directors and stronger adherence to regulatory and corporate governance codes are associated with lower non-performing loan ratios and fewer regulatory interventions. These results highlight persistent gaps in governance that contribute to financial distress and underscore the necessity of strengthening Ghana's banking oversight. The study provides valuable, evidence-based insights for policymakers, regulators, and banking institutions on enhancing governance frameworks to prevent future crises and foster a more resilient financial sector.

Keywords: Corporate Governance; Bank Failures; Financial Stability; Board Composition; Regulatory Compliance; Risk Management; Ghana (search for similar items in EconPapers)
JEL-codes: E3 E31 E32 E52 E58 E6 E61 E63 E66 G2 G20 G21 G22 G23 G24 G28 H5 (search for similar items in EconPapers)
Date: 2025-10-03
New Economics Papers: this item is included in nep-afr, nep-cfn, nep-fdg and nep-mac
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