THE EFFECT OF THE COVID-19 PANDEMIC ON THE FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN GHANA
Keywords:
Covid-19 Pandemic, Commercial Banks, Profitability, ROA, ROE, Ghana.
Abstract
This study examines the effect of the covid-19 pandemic on the profitability of commercial banks in Ghana. The study sampled 24 commercial banks over a 5-year study period from 2017 to 2021. The study collected data from the annual report of these banks. The study measured bank profitability using return on assets and return on equity. The main dependent variable was the covid-19 pandemic, measured as a dummy variable. The study relied on descriptive statistics, correlation analysis, and panel regression analysis to realize the research objectives. The correlation analysis, as well as the panel regression analysis, revealed that there is a positive coefficient between covid-19 pandemic and the return on assets of commercial banks in Ghana. The positive coefficient between covid-19 pandemic and return on assets is statistically significant at a 1% significance level which implies that covid-19 is a significant determinant of the increase in return on assets among commercial banks in Ghana. The correlation and panel regression analysis showed a positive relationship between covid-19 pandemic and returned on equity. However, the positive relationship between covid-19 pandemic and return on equity is not statistically significant, implying that the covid-19 pandemic is not a significant predictor of the changes in return on equity among commercial banks in Ghana.
JEL Classification Codes: E44, G21, G41, E59, G01, G10, G29, L10.
References
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Alvarez‐Botas, C., Fernández‐Méndez, C., & González, V. M. (2022). Large bank shareholders and terms of bank loans during the global financial crisis. Journal of International Financial Management & Accounting, 33(1), 107-133. https://doi.org/10.1111/jifm.12137
Balboula, M. Z., & Metawea, M. S. (2021). The Impact of Covid-19 pandemic on Bank Performance: Evidence from Listed Banks on the Egyptian Stock Exchange. Delta University Scientific Journal, 4(1), 25-35. https://doi.org/10.21608/DUSJ.2021.205891
Barattieri, A., Eden, M., & Stevanovic, D. (2020). Risk sharing, efficiency of capital allocation, and the connection between banks and the real economy. Journal of Corporate Finance, 60, 101538. https://doi.org/10.1016/j.jcorpfin.2019.101538
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Beck, T., & Keil, J. (2021). Are banks catching corona? Effects of COVID on lending in the US. CEPR Discussion Paper No. DP15869. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3805284
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Boadi, E. K., Li, Y., & Lartey, V. C. (2016). Role of Bank Specific, Macroeconomic and Risk Determinants of Banks Profitability: Empirical Evidence from Ghana’s Rural Banking Industry. International journal of economics and financial Issues, 6(2), 813-823. Retrieved from https://dergipark.org.tr/en/pub/ijefi/issue/31978/352529?publisher=http-www-cag-edu-tr-ilhan-ozturkbank
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Charmler, R., Musah, A., Akomeah, E., & Gakpetor, E. D. (2018). The impact of liquidity on performance of commercial banks in Ghana. Academic journal of economic studies, 4(4), 78-90.
Demirgüç-Kunt, A., Pedraza, A., & Ruiz-Ortega, C. (2021). Banking sector performance during the COVID-19 crisis. Journal of Banking & Finance, 133, 106305. https://doi.org/10.1016/j.jbankfin.2021.106305
Duan, Y., El Ghoul, S., Guedhami, O., Li, H., & Li, X. (2021). Bank systemic risk around COVID-19: A cross-country analysis. Journal of Banking & Finance, 133, 106-299. https://doi.org/10.1016/j.jbankfin.2021.106299
Elekdag, S., Malik, S., & Mitra, S. (2020). Breaking the bank? A probabilistic assessment of Euro area bank profitability. Journal of Banking & Finance, 120, 105-949. https://doi.org/10.1016/j.jbankfin.2020.105949
Elgin, C., Yalaman, A., Yasar, S., & Basbug, G. (2021). Economic policy responses to the COVID-19 pandemic: The role of central bank independence. Economics Letters, 204, 109874. https://doi.org/10.1016/j.econlet.2021.109874
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Feyen, E., Gispert, T. A., Kliatskova, T., & Mare, D. S. (2021). Financial sector policy response to COVID-19 in emerging markets and developing economies. Journal of Banking & Finance, 133, 106184. https://doi.org/10.1016/j.jbankfin.2021.106184
Goldstein, I., Koijen, R. S., & Mueller, H. M. (2021). COVID-19 and its impact on financial markets and the real economy. The Review of Financial Studies, 34(11), 5135-5148. https://doi.org/10.1093/rfs/hhab085
GSS. (2021). How COVID-19 is affecting firms in Ghana Results from the Business Tracker Survey.
Guo, Y., Li, P., & Li, A. (2021). Tail risk contagion between international financial markets during COVID-19 pandemic. International Review of Financial Analysis, 73, 101649. https://doi.org/10.1016/j.irfa.2020.101649
Izzeldin, M., Muradoğlu, Y. G., Pappas, V., & Sivaprasad, S. (2021). The impact of Covid-19 on G7 stock markets volatility: Evidence from a ST-HAR model. International Review of Financial Analysis, 74, 101671. https://doi.org/10.1016/j.irfa.2021.101671
Katusiime, L. (2021). COVID 19 and bank profitability in low income countries: the case of Uganda. Journal of Risk and Financial Management, 14(12), 588. https://doi.org/10.3390/jrfm14120588
Kozak, S. (2021). The Impact of COVID-19 on Bank Equity and Performance: The Case of Central Eastern South European Countries. Sustainability, 13(19), 11036. https://doi.org/10.3390/su131911036
Kwan, S. H., & Mertens, T. M. (2020). Market assessment of COVID-19. FRBSF Economic Letter, 2020(14), 1-5. Retrieved from https://www.frbsf.org/economic-research/publications/economic-letter/2020/may/market-assessment-of-covid-19/
Mirzaei, A., Saad, M., & Emrouznejad, A. (2022). Bank stock performance during the COVID-19 crisis: does efficiency explain why Islamic banks fared relatively better?. Annals of Operations Research, 1-39. https://doi.org/10.1007/s10479-022-04600-y
Musah, A. (2018). The impact of capital structure on profitability of commercial banks in Ghana. Asian Journal of Economic Modelling, 6(1), 21-36. https://doi.org/10.18488/journal.8.2018.61.21.36
Musah, A., & Adutwumwaa, M. Y. (2021). The effect of corporate governance on financial performance of rural banks in Ghana. International Journal of Financial, Accounting, and Management, 2(4), 305-319. https://doi.org/10.35912/ijfam.v2i4.336
Musah, A., Padi, A., & Baah, D. (2021). Corporate Governance, Ownership Structure and Gender Diversity in Bank Risk-Taking Behavior in Ghana. Ghanaian Journal of Economics, 9(1), 50-73. Retrieved from https://hdl.handle.net/10520/ejc-ghajecon_v9_n1_a3
Nguyen, Q. K. (2022). Determinants of bank risk governance structure: A cross-country analysis. Research in International Business and Finance, 60, 101575. https://doi.org/10.1016/j.ribaf.2021.101575
Sang, M. (2022). Impact of the Covid-19 pandemic on bank efficiency in Vietnam. Banks and Bank Systems, 17(1), 13-23. https://doi.org/10.21511/bbs.17(1).2022.02
Surahman, S., Kamal, I., Rosari, R., Susilowati, E., & Cakranegara, P. A. (2022). The Impact of the Covid-19 Pandemic on Banking Risks and Performance. Budapest International Research and Critics Institute (BIRCI-Journal): Humanities and Social Sciences, 5(1), 3248-3254. https://doi.org/10.33258/birci.v5i1.3980
Tuffour, J. K., Owusu, P. A., & Boateng, K. O. (2018). Profitability of listed Ghanaian banks determined by the stylized facts. The International Journal of Applied Economics and Finance, 12, 1-8. https://doi.org/10.3923/ijaef.2018.1.8
Wei, X., & Han, L. (2021). The impact of COVID-19 pandemic on transmission of monetary policy to financial markets. International Review of Financial Analysis, 74, 101705. https://doi.org/10.1016/j.irfa.2021.101705
Yan, J., & Jia, P. (2022). The Impact of COVID-19 on Bank Sector Traditional Business Model Sustainability in China: Bank Branch Versus Fintech. Frontiers in Physics, 77. https://doi.org/10.3389/fphy.2022.820646
Alabbad, A., & Schertler, A. (2022). COVID-19 and bank performance in dual-banking countries: an empirical analysis. Journal of Business Economics, 1-47. https://doi.org/10.1007/s11573-022-01093-w
Alvarez‐Botas, C., Fernández‐Méndez, C., & González, V. M. (2022). Large bank shareholders and terms of bank loans during the global financial crisis. Journal of International Financial Management & Accounting, 33(1), 107-133. https://doi.org/10.1111/jifm.12137
Balboula, M. Z., & Metawea, M. S. (2021). The Impact of Covid-19 pandemic on Bank Performance: Evidence from Listed Banks on the Egyptian Stock Exchange. Delta University Scientific Journal, 4(1), 25-35. https://doi.org/10.21608/DUSJ.2021.205891
Barattieri, A., Eden, M., & Stevanovic, D. (2020). Risk sharing, efficiency of capital allocation, and the connection between banks and the real economy. Journal of Corporate Finance, 60, 101538. https://doi.org/10.1016/j.jcorpfin.2019.101538
Barua, S. (2020). Understanding Coronanomics: The economic implications of the coronavirus (COVID-19) pandemic. http://dx.doi.org/10.2139/ssrn.3566477
Beck, T., & Keil, J. (2021). Are banks catching corona? Effects of COVID on lending in the US. CEPR Discussion Paper No. DP15869. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3805284
Berger, A. N., Demirgüç-Kunt, A., Moshirian, F., & Saunders, A. (2021). The way forward for banks during the COVID-19 crisis and beyond: Government and central bank responses, threats to the global banking industry. Journal of Banking & Finance, 133, 106303. https://doi.org/10.1016/j.jbankfin.2021.106303
Boadi, E. K., Li, Y., & Lartey, V. C. (2016). Role of Bank Specific, Macroeconomic and Risk Determinants of Banks Profitability: Empirical Evidence from Ghana’s Rural Banking Industry. International journal of economics and financial Issues, 6(2), 813-823. Retrieved from https://dergipark.org.tr/en/pub/ijefi/issue/31978/352529?publisher=http-www-cag-edu-tr-ilhan-ozturkbank
Borri, N., & Di Giorgio, G. (2022). Systemic risk and the COVID challenge in the European banking sector. Journal of Banking & Finance, 140, 106073. https://doi.org/10.1016/j.jbankfin.2021.106073
Charmler, R., Musah, A., Akomeah, E., & Gakpetor, E. D. (2018). The impact of liquidity on performance of commercial banks in Ghana. Academic journal of economic studies, 4(4), 78-90.
Demirgüç-Kunt, A., Pedraza, A., & Ruiz-Ortega, C. (2021). Banking sector performance during the COVID-19 crisis. Journal of Banking & Finance, 133, 106305. https://doi.org/10.1016/j.jbankfin.2021.106305
Duan, Y., El Ghoul, S., Guedhami, O., Li, H., & Li, X. (2021). Bank systemic risk around COVID-19: A cross-country analysis. Journal of Banking & Finance, 133, 106-299. https://doi.org/10.1016/j.jbankfin.2021.106299
Elekdag, S., Malik, S., & Mitra, S. (2020). Breaking the bank? A probabilistic assessment of Euro area bank profitability. Journal of Banking & Finance, 120, 105-949. https://doi.org/10.1016/j.jbankfin.2020.105949
Elgin, C., Yalaman, A., Yasar, S., & Basbug, G. (2021). Economic policy responses to the COVID-19 pandemic: The role of central bank independence. Economics Letters, 204, 109874. https://doi.org/10.1016/j.econlet.2021.109874
Elnahass, M., Trinh, V. Q., & Li, T. (2021). Global banking stability in the shadow of Covid-19 outbreak. Journal of International Financial Markets, Institutions and Money, 72, 101-322. https://doi.org/10.1016/j.intfin.2021.101322
Falato, A., Goldstein, I., & Hortaçsu, A. (2021). Financial fragility in the COVID-19 crisis: The case of investment funds in corporate bond markets. Journal of Monetary Economics, 123, 35-52. https://doi.org/10.1016/j.jmoneco.2021.07.001
Feyen, E., Gispert, T. A., Kliatskova, T., & Mare, D. S. (2021). Financial sector policy response to COVID-19 in emerging markets and developing economies. Journal of Banking & Finance, 133, 106184. https://doi.org/10.1016/j.jbankfin.2021.106184
Goldstein, I., Koijen, R. S., & Mueller, H. M. (2021). COVID-19 and its impact on financial markets and the real economy. The Review of Financial Studies, 34(11), 5135-5148. https://doi.org/10.1093/rfs/hhab085
GSS. (2021). How COVID-19 is affecting firms in Ghana Results from the Business Tracker Survey.
Guo, Y., Li, P., & Li, A. (2021). Tail risk contagion between international financial markets during COVID-19 pandemic. International Review of Financial Analysis, 73, 101649. https://doi.org/10.1016/j.irfa.2020.101649
Izzeldin, M., Muradoğlu, Y. G., Pappas, V., & Sivaprasad, S. (2021). The impact of Covid-19 on G7 stock markets volatility: Evidence from a ST-HAR model. International Review of Financial Analysis, 74, 101671. https://doi.org/10.1016/j.irfa.2021.101671
Katusiime, L. (2021). COVID 19 and bank profitability in low income countries: the case of Uganda. Journal of Risk and Financial Management, 14(12), 588. https://doi.org/10.3390/jrfm14120588
Kozak, S. (2021). The Impact of COVID-19 on Bank Equity and Performance: The Case of Central Eastern South European Countries. Sustainability, 13(19), 11036. https://doi.org/10.3390/su131911036
Kwan, S. H., & Mertens, T. M. (2020). Market assessment of COVID-19. FRBSF Economic Letter, 2020(14), 1-5. Retrieved from https://www.frbsf.org/economic-research/publications/economic-letter/2020/may/market-assessment-of-covid-19/
Mirzaei, A., Saad, M., & Emrouznejad, A. (2022). Bank stock performance during the COVID-19 crisis: does efficiency explain why Islamic banks fared relatively better?. Annals of Operations Research, 1-39. https://doi.org/10.1007/s10479-022-04600-y
Musah, A. (2018). The impact of capital structure on profitability of commercial banks in Ghana. Asian Journal of Economic Modelling, 6(1), 21-36. https://doi.org/10.18488/journal.8.2018.61.21.36
Musah, A., & Adutwumwaa, M. Y. (2021). The effect of corporate governance on financial performance of rural banks in Ghana. International Journal of Financial, Accounting, and Management, 2(4), 305-319. https://doi.org/10.35912/ijfam.v2i4.336
Musah, A., Padi, A., & Baah, D. (2021). Corporate Governance, Ownership Structure and Gender Diversity in Bank Risk-Taking Behavior in Ghana. Ghanaian Journal of Economics, 9(1), 50-73. Retrieved from https://hdl.handle.net/10520/ejc-ghajecon_v9_n1_a3
Nguyen, Q. K. (2022). Determinants of bank risk governance structure: A cross-country analysis. Research in International Business and Finance, 60, 101575. https://doi.org/10.1016/j.ribaf.2021.101575
Sang, M. (2022). Impact of the Covid-19 pandemic on bank efficiency in Vietnam. Banks and Bank Systems, 17(1), 13-23. https://doi.org/10.21511/bbs.17(1).2022.02
Surahman, S., Kamal, I., Rosari, R., Susilowati, E., & Cakranegara, P. A. (2022). The Impact of the Covid-19 Pandemic on Banking Risks and Performance. Budapest International Research and Critics Institute (BIRCI-Journal): Humanities and Social Sciences, 5(1), 3248-3254. https://doi.org/10.33258/birci.v5i1.3980
Tuffour, J. K., Owusu, P. A., & Boateng, K. O. (2018). Profitability of listed Ghanaian banks determined by the stylized facts. The International Journal of Applied Economics and Finance, 12, 1-8. https://doi.org/10.3923/ijaef.2018.1.8
Wei, X., & Han, L. (2021). The impact of COVID-19 pandemic on transmission of monetary policy to financial markets. International Review of Financial Analysis, 74, 101705. https://doi.org/10.1016/j.irfa.2021.101705
Yan, J., & Jia, P. (2022). The Impact of COVID-19 on Bank Sector Traditional Business Model Sustainability in China: Bank Branch Versus Fintech. Frontiers in Physics, 77. https://doi.org/10.3389/fphy.2022.820646
Published
2022-10-08
How to Cite
Musah, A., Padi, A., & Ahmed, I. A. (2022). THE EFFECT OF THE COVID-19 PANDEMIC ON THE FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN GHANA. International Journal of Accounting & Finance Review, 12(1), 21-29. https://doi.org/10.46281/ijafr.v12i1.1804
Section
Regular Research Article/ Short Communication Article
Copyright (c) 2022 Alhassan Musah, Abigail Padi, Ibrahim Anyass Ahmed
This work is licensed under a Creative Commons Attribution 4.0 International License.
