Assessment Of The Relationship Between Capital, Risk And Efficiency In Ghana Commercial Banking Sector

Abstract

This article analyzes the relationship between capital, risk and efficiency for a large sample of banks in Ghana between 2008 and 2016. Contrary to the American belief, we do not find a positive correlation between inefficiency and the acceptance of risk by banks. Ineffective banks in Ghana seem to have more capital and less risk. Empirical evidence of the positive correlation between capital risk (and liquidity risk) has been found, indicating that the regulator prefers to use capital to limit its risk-weighted assets. We also discovered that the financial strength of the corporate sector had a positive effect on risk appetite and the reduction of bank capital. There is no significant difference between capital, risk and efficiency in commercial banks, savings banks and cooperative banks. For cooperative banks, we find that capital is inversely proportional to risk and that inefficient banks have less capital. Some of these relationships also depend on the banks of the most efficient or efficient operators.