Journal of Finance and Economics
ISSN (Print): 2328-7284 ISSN (Online): 2328-7276 Website: Editor-in-chief: Suman Banerjee
Open Access
Journal Browser
Journal of Finance and Economics. 2021, 9(2), 42-52
DOI: 10.12691/jfe-9-2-1
Open AccessArticle

Main Determinants of Banks’ Stability: Evidence from Commercial Banks in Ghana

Joseph Yensu1, Hadrat M. Yusif2, Emmanuel Tetteh3, George Asumadu4 and Daniel A. Atuilik5,

1Department of Finance, Kumasi Technical University, Kumasi-Ghana

2Department of Economics, Kwame Nkrumah University of Science and Technology, Kumasi-Ghana

3Department of Finance, Ghana Cocoboard, Accra, Ghana

4Department of Accountancy and Accounting Information systems, Kumasi Technical University, Kumasi-Ghana

5Department of Infomatics, Heritage Christian College, Accra, Ghana

Pub. Date: April 06, 2021

Cite this paper:
Joseph Yensu, Hadrat M. Yusif, Emmanuel Tetteh, George Asumadu and Daniel A. Atuilik. Main Determinants of Banks’ Stability: Evidence from Commercial Banks in Ghana. Journal of Finance and Economics. 2021; 9(2):42-52. doi: 10.12691/jfe-9-2-1


This study focuses on the main determinants of the stability of commercial banks in Ghana. The work was guided by three objectives, namely investigating the firm-specific, board characteristics and macroeconomic variables that determine bank stability in Ghana. This study used panel data, sourced from 8 banks over 2008-2017, constituting 80 observations. Firm-specific and board-characteristic data were sourced from the selected banks through their audited financial statements. Data on macroeconomic variables were sourced from World Development Indicators, 2018 and Bank of Ghana. The study, through Hausman specification test, selected appropriate models for estimations. STATA 13.0 was used for the data analysis. From the findings, bank size and net profit margin had significant positive effects on bank stability whilst interest cover had a negative significant effect on banks’ stability. Also, characteristics, gender of CEO, board size and frequency of board meeting there was a significant positive effect on bank stability. With regards to macroeconomic variables effect, inflation and growth of gross domestic product had significant positive impact on banks’ stability. Bank rate had a significant negative impact on bank stability. The study therefore recommends that, the commercial banks in Ghana should embark on reasonable expansion. They should also ensure effective and efficient utilization of all banks' assets. The banks should further constitute a reasonably board size, made up of different expertise. Government of Ghana should consciously embark on accelerated economic growth, supported by sound economic fundamentals.

Bank Stability determinants firm-specific Hausman Test Ghana

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit


[1]  Appiah, F. K. F., The Effect of Mergers and Acquisitions on Banks Financial Performance in the Ghanaian Banking Industry (A Case Study of FBN bank Ghana Limited and International Commercial Bank) (Doctoral dissertation, University of Ghana). 2019.
[2]  Selvarajan, B., & Vadivalagan, D. G., A Study on Management of Non-performing Assets in Priority Sector reference to Indian Bank and Public Sector Banks (PSBs). Global Journal of Management and Business Research, 2013. 13(1), 18-34.
[3]  Arko, S. K., Determining the Causes and Impact of Non-Performing Loans on the Operations of Microfinance Institutions: A Case of Sinapi Aba Trust (Doctoral dissertation). 2012.
[4]  Patil, A., Parab, N., & Reddy, Y. V., Analyzing the impact of demonetization on the Indian stock market: Sectoral evidence using GARCH model. 2018.
[5]  Khrawish, H., Determinants of Commercial Bank Performance: Evidence from Jordan. International Research Journal of Finance and Economics, 2011. 81, 19-45.
[6]  Swamy, V., Testing the interrelatedness of banking stability measures. Journal of Financial Economic Policy, 2014. 6(1), 25-45.
[7]  Mwega, F. M., Financial Regulation in Kenya: Balancing Inclusive Growth with Financial Stablity. Overseas Development Institute. 2013.
[8]  Alfi, A. F. (2014). Understanding Financial Stability & Macro-prudential Policy. The Economic Journal, 122(565), 1346-1372.
[9]  Vlahović, A., Challenges to the Implementation of a New Framework for Safeguarding Financial Stability. Journal of Central Banking Theory and Practice, 3(3), 2014, 19-52.
[10]  Almazari, A. A., Impact of internal factors on bank profitability: Comparative study between Saudi Arabia and Jordan. Journal of Applied finance and banking, 2014. 4(1), 125.
[11]  Azam, M. & Siddiqui, S., 2012. Domestic and Foreign Banks Profitability: Differences and their Determinants. Volume 2 No. 1.
[12]  Vento, G.A. & Ganga, L. (2010). Inter-bank Market and Liquidity Distribution during the Great Financial. The e-MID Case.
[13]  Huang, R., & Ratnovski, L., The dark side of bank wholesale funding. Journal of Financial Intermediation, 2011. 20(2), 248-263.
[14]  Ratnovski, L., Liquidity and transparency in bank risk management. Journal of Financial Intermediation, 2013. 22(3), 422-439.
[15]  Jahn, N., & Kick, T., Determinants of banking system stability: A macro-prudential analysis. The Journal of Finance, 2012. 52(6), 12-23.
[16]  Hoffmann, P. S., Determinants of the Profitability of the Us Banking Industry. International Journal of Business and Social Science, 2011. 2(22).
[17]  Andrés, J. & Arce, O., Banking competition, housing prices and macroeconomic stability. The Economic Journal, 2012. 122(565), 1346-1372.
[18]  Forker, J., & Ward, A. M., 2012. Prudence and financial self-regulation in credit unions in Northern Ireland. The British Accounting Review, 44(4), 221-234.
[19]  Cukierman, A., 2013. Monetary policy and institutions before, during, and after the global financial crisis. Journal of Financial Stability, 9(3), 373-384.
[20]  Dang, 2011. Regional capital mobility in China: 1978-2006. Journal of International Money and Finance, 30(7), 1506-1515.
[21]  Sangmi, M. & Tabassum, N., Analysing Financial Performance of Commercial Banks in India: Application of CAMEL Model. Pakistan Journal Commercial Social Sciences. 2010. 3(2), 301-311.
[22]  Said, R. M., & Tumin, M. H. Performance and financial ratios of commercial banks in Malaysia and China. International Review of Business Research Papers, 2011. 7(2), 157-169.
[23]  Githae, F. K., Effect of Interest Rates Spread on the Financial Performance. The British Accounting Review, 2012. 44(4), 235-241
[24]  Kimani, Assessment of effects of monetary policies on lending behaviour of commercial banks in Kenya. unpublished study. 2013.
[25]  Podder B., Determinants of profitability of private commercial banks in Bangladesh: An empirical study. A thesis for a Professional Master in Banking and Finance, Asian Institute of Technology, Thailand. 2012.
[26]  Swarnapali, R. M., Firm Specific Determinants and Financial Performance of Licensed Commercial Banks in Sri Lanka, Proceedings of the 3rd International Conference on Management and Economics, 2014. 26-27.
[27]  Gachua, N. F., The effect of foreign exchange exposure on a Firm’s financial performance. Unpublished MBA Project, KCA University.
[28]  Tadesse, G., The Impact of Exchange Rate on the Profitability of Commercial Banks in Ethiopia (Doctoral dissertation, AAU), 2015.
[29]  Bakang, M. L. N., 2012. Effects of Financial Deepening on Economic Growth in Kenya. Journal of International Financial Markets, Institutions, and Money, 18(1): 121-36.
[30]  Nguena, C. L. & Abimbola, T. M., Financial Deepening Dynamics and Implication for Financial Policy Coordination in a Monetary Union: the case of WAEMU. Article Presented At: African Economic Conference 2013 “Regional Integration in Africa” Johannesburg, South Africa; From 28 to 30/10/2013. 2013.
[31]  Vijayakumar, A, & Tamizhselvan, P., Corporate size and profitability: An empirical analysis. College Sadhana Journal for Bloomers of Research, 2010. 3 (1), 44-53
[32]  Konadu, J.S., Liquidity and Profitability: Empirical evidence from banks in Gha na. Kwame Nkrumah University of Science and Technology. The Journal of Finance 2009. 52(6), 12-23.
[33]  Maina, L. & Ondongo, K., Capital structure and financial performance in Kenya: evidence from firms listed at the Nairobi Securities Exchange. Jomo.
[34]  Acharya, V. A., 2009. Theory of Systemic Risk and Design of Prudential Bank Regulation. Journal of Financial Stability. 4(5), 11-23.