Bank-Specific and Macroeconomic Determinants of Commercial Banks Profitability in Ghana

Abstract

This study examines the influence of bank-specific and macroeconomic factors on commercial banks profitability in Ghana. The study employed the ordinary least square regression model to analyse the data obtained from the annual financial statements of five commercial banks from 2010 to 2015. The empirical results suggest that bank size, liquidity, capital adequacy, asset management, expense management, and real interest rate are positively related to profitability. GDP growth and inflation rate on the other hand, are related negatively to profitability. However, only bank size, liquidity, and expense management have a significant effect on commercial banks profitability. It can be observed that commercial banks profitability in Ghana is largely determined by bank-specific factors, whereas macroeconomic factors have an insignificant impact on banks profitability for the period considered. Therefore, it is crucial for management of commercial banks in Ghana to efficiently manage the factors that contribute to their profitability in order to enhance superior performance.