Abstract
Risk management is a very important concept for any business as most financial decisions revolve around the corporate cost of holding risk. This issue is particularly important to banks since risk constitutes their core business processes. This paper examines how credit risk affects a bank's capital structure, profitability and lending decisions. The study employs panel regression analysis to investigate the relationship between credit risk exposure and bank capital structure, profitability and lending decisions. The results indicate that less than 1% of Ghanaian banks are exposed to credit risk, and that more than 86% of their assets are financed by debts. The banks' average lending rate is around 28%. The results also show that capital structure (equity to total assets) of banks is positively related to banks' credit risk, profitability and risk and negatively related to banks' size, liquid assets and lending.
Original language | English |
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Pages (from-to) | 93-101 |
Number of pages | 9 |
Journal | Banks and Bank Systems |
Volume | 1 |
Issue number | 1 |
Publication status | Published - 2006 |
Keywords
- Banks
- Capital structure
- Ghana
- Lending
- Risk management