The Impact Of Corporate Governance On Asset Quality Of Banks.A Case Of The Ghanaian Banking Sector

ABSTRACT This study set out to assessed the impact of governance variables on asset quality of Ghanaian banks. Using thirty-two banks operating in Ghana from 2006 to 2016, the study investigates how corporate governance can influence the quality of asset among banks. The study employed random estimation technique strategy. The findings for the study indicate that non-executive board member ratio has a significant inverse nexus on NPLs. The results suggest that the presence of outside directors tend to reduce the rate at which loan defaults. The regression results also indicate that board gender has a significant and a direct relationship on NPLs. It also established that as a board is composed of more female directors, loans tend to underperform leading to increase in NPLs. Meanwhile board size and board duality are not statistically significant even though both had negative relationship on NPLs. The size of a bank is also directly proportional to NPLs. Inflation variable is significant and has a positive relationship to NPLs of banks in Ghana. It is recommended that non-executive directors and gender diversity which are governance variables should be given much attention since it can and structure in a way that can help reduce the rate at which loan default. It is also recommended that larger banks put in the necessary credit risk assessment measure to reduce the cost that comes with adverse selection and moral hazards. Finally, the government must ensure that, there is a moderate check on how goods and services prices persistently increase overtime as it positively impacts on non-performing loans in banks in Ghana.