Determinants of Bank Profitability in Ghana: New Evidence

Abstract

This study examines the determinants of profitability in the Ghanaian Banking Industry for an eight (8) year period of 2007 to 2014. Using a sample from 9 local banks and 12 foreign banks in Ghana, the study combines bank-specific determinants and macroeconomic variables to access bank profitability with Return on Assets (ROA) as the dependent variable. The Hausman specification test was performed on a panel regression to determine the appropriate model for this study. The estimation results shows that, bank SIZE and DEPOSITS are not significant and does not impact profitability. However, LOANS, CAPITAL and OVERHEADS were found to be significant and impacts on profitability. The study concludes that banks in Ghana should be technological in their operations to reduce staff cost since the OVERHEAD was highly significant and impacts negatively on ROA.