Regulatory capital requirements and bank performance in Ghana: evidence from panel corrected standard error

Over the past fifteen years, the Bank of Ghana has revised the minimum capital requirement to stabilize the banking sector. Motivated by the unintended consequences of regulatory capital, this paper provides empirical evidence between minimum capital requirement and bank performance relationship in...

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Autores principales:	Joshua Nsanyan Sandow, Emmanuel Duodu, Eric Fosu Oteng-Abayie
Formato:	article
Lenguaje:	EN
Publicado:	Taylor & Francis Group 2021
Materias:	minimum capital requirements bank performance pcse ghana Finance HG1-9999 Economic theory. Demography HB1-3840
Acceso en línea:	https://doaj.org/article/662f8d6905a44001887fb05d54d663d9
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id	oai:doaj.org-article:662f8d6905a44001887fb05d54d663d9
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spelling	oai:doaj.org-article:662f8d6905a44001887fb05d54d663d92021-11-26T11:19:50ZRegulatory capital requirements and bank performance in Ghana: evidence from panel corrected standard error2332-203910.1080/23322039.2021.2003503https://doaj.org/article/662f8d6905a44001887fb05d54d663d92021-01-01T00:00:00Zhttp://dx.doi.org/10.1080/23322039.2021.2003503https://doaj.org/toc/2332-2039Over the past fifteen years, the Bank of Ghana has revised the minimum capital requirement to stabilize the banking sector. Motivated by the unintended consequences of regulatory capital, this paper provides empirical evidence between minimum capital requirement and bank performance relationship in Ghana. We draw data on a sample of 20 universal banks spanning 2008 to 2017. The Panel Corrected Standard Errors (PCSE) estimation was adopted. The results indicate that the minimum capital requirement has a significant positive impact on bank performance measured by return on assets (ROA) and equity (ROE). However, the effects turned negative after 1.7% and 1.6% performance thresholds for ROA and ROE, respectively. Given this, the study establishes the relationship between capital requirement and bank performance in Ghana to be double-edged. The capital requirement improves bank performance initially, but bank performance worsens after the threshold values. Policy implications for Ghana’s banks, regulators, and policymakers have been provided based on the findings.Joshua Nsanyan SandowEmmanuel DuoduEric Fosu Oteng-AbayieTaylor & Francis Grouparticleminimum capital requirementsbank performancepcseghanaFinanceHG1-9999Economic theory. DemographyHB1-3840ENCogent Economics & Finance, Vol 9, Iss 1 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	minimum capital requirements bank performance pcse ghana Finance HG1-9999 Economic theory. Demography HB1-3840
spellingShingle	minimum capital requirements bank performance pcse ghana Finance HG1-9999 Economic theory. Demography HB1-3840 Joshua Nsanyan Sandow Emmanuel Duodu Eric Fosu Oteng-Abayie Regulatory capital requirements and bank performance in Ghana: evidence from panel corrected standard error
description	Over the past fifteen years, the Bank of Ghana has revised the minimum capital requirement to stabilize the banking sector. Motivated by the unintended consequences of regulatory capital, this paper provides empirical evidence between minimum capital requirement and bank performance relationship in Ghana. We draw data on a sample of 20 universal banks spanning 2008 to 2017. The Panel Corrected Standard Errors (PCSE) estimation was adopted. The results indicate that the minimum capital requirement has a significant positive impact on bank performance measured by return on assets (ROA) and equity (ROE). However, the effects turned negative after 1.7% and 1.6% performance thresholds for ROA and ROE, respectively. Given this, the study establishes the relationship between capital requirement and bank performance in Ghana to be double-edged. The capital requirement improves bank performance initially, but bank performance worsens after the threshold values. Policy implications for Ghana’s banks, regulators, and policymakers have been provided based on the findings.
format	article
author	Joshua Nsanyan Sandow Emmanuel Duodu Eric Fosu Oteng-Abayie
author_facet	Joshua Nsanyan Sandow Emmanuel Duodu Eric Fosu Oteng-Abayie
author_sort	Joshua Nsanyan Sandow
title	Regulatory capital requirements and bank performance in Ghana: evidence from panel corrected standard error
title_short	Regulatory capital requirements and bank performance in Ghana: evidence from panel corrected standard error
title_full	Regulatory capital requirements and bank performance in Ghana: evidence from panel corrected standard error
title_fullStr	Regulatory capital requirements and bank performance in Ghana: evidence from panel corrected standard error
title_full_unstemmed	Regulatory capital requirements and bank performance in Ghana: evidence from panel corrected standard error
title_sort	regulatory capital requirements and bank performance in ghana: evidence from panel corrected standard error
publisher	Taylor & Francis Group
publishDate	2021
url	https://doaj.org/article/662f8d6905a44001887fb05d54d663d9
work_keys_str_mv	AT joshuansanyansandow regulatorycapitalrequirementsandbankperformanceinghanaevidencefrompanelcorrectedstandarderror AT emmanuelduodu regulatorycapitalrequirementsandbankperformanceinghanaevidencefrompanelcorrectedstandarderror AT ericfosuotengabayie regulatorycapitalrequirementsandbankperformanceinghanaevidencefrompanelcorrectedstandarderror
_version_	1718409475910533120

Regulatory capital requirements and bank performance in Ghana: evidence from panel corrected standard error

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