Nonperforming loans and bank profitability: evidence from an emerging market

Esther Laryea, Matthew Ntow-Gyamfi and Angela Azumah Alu

African Journal of Economic and Management Studies, 2016, vol. 7, issue 4, 462-481

Abstract: Purpose - The purpose of this paper is to investigate the bank-specific and macroeconomic determinants of nonperforming loans (NPLs) as well as the impact of NPLs on bank profitability. Design/methodology/approach - Using a sample of 22 Ghanaian banks over the period 2005-2010, the study employs a fixed effect panel model in estimating three different empirical models. Findings - The study finds new evidence of bank-specific factors as well as macroeconomic factors determining NPLs. Inflation and industry concentration are not significant in determining NPLs, although both are positively related to NPLs. Practical implications - The findings of this study have important implications for policy makers and bank managers. Originality/value - The paper offers significant value in shaping and improving the banking sector of emerging markets.

Keywords: Emerging markets; Ghana; Credit risk; Bank profitability; Firm-specific determinants; Nonperforming loans (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:ajems-07-2015-0088

DOI: 10.1108/AJEMS-07-2015-0088

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