Determinants of Credit Risk in the Banking Industry of Ghana.

Abstract

This paper examines bank-specific, industry-specific and macroeconomic factors that influence credit risk (CR) in commercial banks in Ghana using unbalanced panel data set from 33 commercial banks covering the 21-year period 1990 to 2010. The study employed annual time series data from 1990 to 2010. The paper is the first of its kind in Ghana, a developing country with emphasis on macroeconomic tools relied on by the central bank for creating a stable macroeconomic environment.

Results suggest that credit risk in Ghana is significantly influenced by management efficiency, GDPPC, Government borrowing and the financial sector development. Government borrowing and financial sector development have a negative relationship with credit risk while management inefficiency and GDPPC have a positive relationship.

Keywords: Ghana, Credit risk , Bank-specific factors, Industry-Specific factors, Macroeconomic variables