Title: Determinants of performance of rural banks in Ghana

Authors: Kingsley Opoku Appiah; Lawrence Adu Asamoah; Zeno Narkotey

Addresses: School of Business, Kwame Nkrumah University of Science and Technology, KNUST Post Office, PMB, Kumasi, Ghana ' Department of Economics, Kwame Nkrumah University of Science and Technology, Ghana ' Agricultural Development Bank, Prempeh II St. Branch, Ghana

Abstract: Understanding the factors that influence the financial performance of the rural banking industry is imperative due to its importance to rural poverty alleviation in most developing countries. Using panel data analysis, this paper investigates the factors that influence the profitability of rural banking industry in Ghana. We find that performance of rural bank is positively related to deposit and liquidity. Performance of rural bank, however, is negatively related to asset quality, bank size, and oil prices but not inflation and cocoa prices. The results of the bank-specific factors are robust to the inclusion of macroeconomic measures. The macroeconomic variables slightly improve the explanatory power of our model. This is the first study of its kind in the rural banking sector, particularly within Sub-Saharan Africa.

Keywords: Ghana; rural banks; asset quality; capital adequacy; bank performance; performance evaluation; banking industry; financial performance; poverty alleviation; developing countries; bank deposits; bank liquidity; asset quality; bank size; oil prices; inflation; cocoa prices; macroeconomic variables.

DOI: 10.1504/AJAAF.2015.075113

African Journal of Accounting, Auditing and Finance, 2015 Vol.4 No.4, pp.345 - 359

Received: 27 Jun 2015
Accepted: 02 Jul 2015
Published online: 03 Mar 2016 *

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