Title: Bank risk and performance in Ghana

Authors: Theodora A. Odonkor, Kofi A. Osei, Joshua Abor, Charles K.D. Adjasi

Addresses: Department of Finance, University of Ghana Business School, P.O. Box LG 78, Legon, Ghana. ' Department of Finance, University of Ghana Business School, P.O. Box LG 78, Legon, Ghana. ' Department of Finance, University of Ghana Business School, P.O. Box LG 78, Legon, Ghana. ' Department of Finance, University of Ghana Business School, P.O. Box LG 78, Legon, Ghana

Abstract: This paper examines the effect of risk on bank performance in Ghana. A panel data analysis of 18 banks over the period 1997-2008 is used in the study. The results show that lower risk levels lead to an increase in bank performance. In addition, the results show that when ownership interacts with risk, domestic banks that reduce risk are more likely to perform better than foreign banks with similar risk profiles. We also find that when size interacts with risk, bigger banks which engage in lower risk taking have lower performance. Relative to smaller banks, larger banks could increase activities aggressively and accommodate more risk leading to higher performance. Our results generally call for prudence in bank risk management by risk managers and central bankers alike.

Keywords: bank risk; bank performance; bank size; Ghana; banking industry; domestic bank; foreign banks; risk management.

DOI: 10.1504/IJFSM.2011.041919

International Journal of Financial Services Management, 2011 Vol.5 No.2, pp.107 - 120

Available online: 15 Aug 2011 *

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