The impact of capital adequacy and corporate governance on financial performance of universal banks in Ghana

Abstract

The study seeks to determine the influence of capital adequacy ratio (CAR) and corporate governance attributes on financial performance of listed universal banks in Ghana. The authors sampled five banks from a population of nine banks listed on the Ghana Stock Exchange (GSE) using a simple random sampling method. The study employed quantitative design and procedures using secondary quarterly data from annual financial statements published from 2012 to 2022. The data was analysed using the fixed-effects regression model with Stata (ver. 17). The findings indicate that some universal banks have board sizes less than 13, which is at variance with the number required by the Corporate Governance Guidelines (CGGs) of the Bank of Ghana (BoG). Again, CAR, bank size, monetary policy rate, and inflation rate have a statistically significant impact on return on assets, while board size, board of directors (BoD) independence, GDP, and non-performance loan ratio have an insignificant influence on the financial performance of listed universal banks in Ghana. The study recommends that the management of universal banks listed on the GSE should seriously consider the BoG’s CGGs and suggests that the BoD should not have less than 13 members. The study recommends that universal banks adhere to the required CAR from the Central bank religiously. Again, universal banks should open more branches in all district capital to ensure they mobilize liquidity from those with surplus funds to boost the availability of loanable funds for businesses to borrow for their operations. The study also recommends that more research be conducted to determine the optimal number of directors on the board to ensure the optimal performance of universal banks in Ghana.