The Impact of Capital Adequacy and Bank Size on Profitability of Ghanaian Banks

Shirazu Kuvidana Abdulai and Siisu Umar

MPRA Paper from University Library of Munich, Germany

Abstract: This study examines the influence of capital adequacy ratio and bank size on the profitability of Ghanaian banks from 2008 to 2017, while also considering macroeconomic factors such as inflation and the monetary policy rate. Using return on assets (ROA) as the measure of profitability and analyzing data from seven recapitalized banks and the Bank of Ghana, the study employs the Ordinary Least Squares (OLS) technique. The findings reveal that capital adequacy ratio and bank size significantly boost profitability, inflation positively impacts it, and the monetary policy rate has a negative effect. The study recommends that the Bank of Ghana increase regulatory capital requirements and keep the policy rate low to enhance bank stability and profitability.

Keywords: Capital adequacy; Bank size; Return on asset; ordinary least squares; Ghana (search for similar items in EconPapers)
JEL-codes: G0 G1 G21 (search for similar items in EconPapers)
Date: 2022, Revised 2022
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