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Bank Risk Control and Shareholder Value Creation: The Case of Ghana


Lord Mensah
Francis A Ayernor
Godfred A Bokpin
Eric Ofosu-Hene

Abstract

This paper examines bank risk factors that determined shareholder value in the Ghanaian banking industry between the years 2007 and 2015. The system-generalized method of moment is used to estimate a dynamic panel model, with shareholder value as a linear function of bank specific risk factors, industry specific and macroeconomic variables. Lags of risk factors were used as bank specific variables. Surprisingly, the results indicate that shareholder value has a positive relationship with credit risk. Therefore, banks could mitigate this risk by increasing their loan portfolio, and making provisions to commensurate with expected losses in order to make their residual claimants (shareholders) happy. In addition, shareholder value is negatively impacted by capital risk, interest-rate risk and operational risk.


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eISSN: 2458-7435
print ISSN: 2343-6689