Revue internationale des sciences économiques et de gestion

Corporate Governance a Predictor of Banks Failure: Evidence from Registered Commercial Banks in Ghana

Abstract

Victor Marvelous Atsu*

The quantitative study sought to identify corporate governance elements that precipitate commercial banks failure in Ghana and to outline policy recommendations to address those factors to make commercial banks more resilient and profitable. The quantitative study seeks to contribute to the body of knowledge by providing understanding on factors that contributes to banks failure in emerging economy like Ghana. A random sampling approach was used to collect annual report and published financial statement on 21 commercial banks. Based on this data, a fiveyear (5) panel data was formed: using a data range (2012 -2016 multiplied by 21 sampled banks) making a total of one hundred and five (105) observations. A random effect model was used to estimate the relationship between corporate governance elements and banks failure. Next, a correlation analysis was employed to examine the relationships between corporate governance elements, banks-specific financial proxies and exogenous factors and banks failure. Results from the study indicate a significant relationship between corporate governance variables, banks-specific financial information and macroeconomic indicators and banks failure. The study recommends the creation of Ghanaian corporate governance act to propose and increase in the female representation on the governing boards of commercial banks. This measure is to increase gender diversity and skills in the boardroom as it is evident in the study that higher gender diversity reduces the risk of banks failure. More so, the study recommends an effective management of credit default rate (using credit default swap to mitigate credit losses and) to boost financial soundness and profitability of banks in Ghana.