Impact of banking regulatory regime on the quality of bank earnings in ghana
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Date
2023
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KNUST
Abstract
In recent years, banking research has focused on how regulations affect stability, efficiency, and performance, particularly in light of the recent financial crisis. Financial stability is crucial for the banking industry because it guarantees effective financial intermediation and enhances credit risk management in Ghana's financial sector. The study sought to examine the connection between the financial regulatory agency's mandate, authority, and reach and the quality of banks' earnings, to determine the effect of the regulatory agency's risk-based supervisory methods on the standard of bank earnings, to determine how the internal structure of banking supervision and bank activity restrictions affects the quality of bank earnings. The Ghana commercial banks listed on GSE were chosen as the demographic for this research. Purposive sampling was used in this study to sample 9 commercial banks listed from the other commercial banks due to data availability. Secondary data was gathered through annual reports. The information was gathered from the period (20102021). Both Feasible Generalised Least Squares (FGLS) and Generalised Methods of Moment were adopted to estimate the parameters involved in the study objectives. The results show that there is a consistent and statistically significant unfavourable link between the quality of bank profitability and the regulatory structures that govern them. The propensity for bank managers to engage in opportunistic profits management is reduced, as the study discover when banking regulatory scores are higher. However, the study also discovers that various regulatory strategies have different impacts on profit management, with some having positive contributions and others negative ones. The study concludes that the internal organization of banking supervision, prudent bank activity limitation, and regulatory procedures relevant to the duties, authority, and scope of the banking supervision agency all contribute to higher-quality bank profits. However, the study demonstrates that bank managers are more likely to engage in opportunistic behaviour as a consequence of systemic risk assessments, financial stability, and stress testing at the bank and system levels, which in turn leads to a reduction in the quality of bank profitability.
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This thesis is submitted to the kwame nkrumah university of science and technology in partial fulfilment of the requirements for the awards of msc. Accounting and finance degree.