The Impact Of The Performance Of Listed Banks On Economic Growth Of Ghana

Banks are the main financial intermediary between savings and investment in the economy,and Ghana’s economic growth,like many other economies around the world,is likely to be affected by banking inefficiencies.The heightened vulnerabilities in the banking sector in Ghana caused a resolution of five locally-owned banks in 2018 with valuable fiscal costs to the government of Ghana.With the relevance of the issue of efficiency of banks,it necessitates empirical research to examine the financial performance of banks to well appreciate the conditions of the banking industry and the pragmatic factors that should be considered in decision making and policy formulation to improve the industry and enhance economic growth.There is a big gap in the relevant literature on the role of bank financial performance in achieving economic growth in Ghana and this study thus examines the factors that influence the performance of listed banks on the Ghana Stock Exchange and the impact of bank performance on Ghana’s economic growth.The study used panel data spanning 2010-2019 from five major listed banks namely;GCB Bank,HFC Bank,Ghana Economic Bank(EBG),SG-SSB Bank and CAL Bank,and used fixed panel data regression and the Hausman test econometric methods.On the one hand,this study examined the determines of banks performance using the profitability ratios(ROE and ROA)whereas analyzing the effect this performance yield on economic growth.Empirical results from the fixed effect regression show that income has a significant positive effect on return on asset.Current assets and total assets(LATA)variables have a negative and significant impact on return on assets and return on equity.Non-interest expense has a significant positive impact on Ghana’s economic growth.OLS results show that the capital adequacy ratio has a positive impact on the economic growth of the listed banks of the Ghana Stock Exchange,while the capital adequacy ratio has a negative impact on economic growth.According to the study,the return on assets and the return on net assets have a significant positive impact on Ghana’s economic growth.The positive impact of return on assets explains how banks effectively convert money into net income,which in turn boosts the financial sector of the economy.A good financial sector shows that the economy is strong.The study therefore suggests that stakeholders,policymakers and Governments must continue to implement pragmatic policies to encourage financial institutions to maintain disciplined accounting records,since the higher the percentage of return on assets,the better.