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Credit risk and universal banking: evidence from the banking industry in Ghana

Credit risk and universal banking: evidence from the banking industry in Ghana Using a dynamic panel data and an Arellano-Bond estimation technique, we estimate the determinants of credit risk and the effect of the introduction of universal banking licence on credit risk in the banking industry of Ghana. We find that the effect of universal banking policy on credit risk in the banking industry depends on the definition of credit risk. Using total loan to total asset ratio as a proxy for credit risk, we observe a positive effect of universal banking policy on credit risk in all our models, indicating that universal banking policy has the potential of increasing credit risk. However, there is a mixed and weak effect of universal banking policy on credit risk when we define credit risk as bad debt to total loan ratio. Also, we find that both bank-specific and macroeconomic variables do explain credit risk in the banking industry of Ghana. Keywords: credit risk; universal banking; bad debt; dynamic panel data; Arellano­Bond estimation; Ghana. Reference to this paper should be made as follows: Amuakwa-Mensah, F., Marbuah, G., Sam, V.N. and Barimah, A. (2015) `Credit risk and universal banking: evidence from the banking industry in Ghana', Int. J. Computational Economics and Econometrics, Vol. 5, http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Computational Economics and Econometrics Inderscience Publishers

Credit risk and universal banking: evidence from the banking industry in Ghana

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Publisher
Inderscience Publishers
Copyright
Copyright © 2015 Inderscience Enterprises Ltd.
ISSN
1757-1170
eISSN
1757-1189
DOI
10.1504/IJCEE.2015.072294
Publisher site
See Article on Publisher Site

Abstract

Using a dynamic panel data and an Arellano-Bond estimation technique, we estimate the determinants of credit risk and the effect of the introduction of universal banking licence on credit risk in the banking industry of Ghana. We find that the effect of universal banking policy on credit risk in the banking industry depends on the definition of credit risk. Using total loan to total asset ratio as a proxy for credit risk, we observe a positive effect of universal banking policy on credit risk in all our models, indicating that universal banking policy has the potential of increasing credit risk. However, there is a mixed and weak effect of universal banking policy on credit risk when we define credit risk as bad debt to total loan ratio. Also, we find that both bank-specific and macroeconomic variables do explain credit risk in the banking industry of Ghana. Keywords: credit risk; universal banking; bad debt; dynamic panel data; Arellano­Bond estimation; Ghana. Reference to this paper should be made as follows: Amuakwa-Mensah, F., Marbuah, G., Sam, V.N. and Barimah, A. (2015) `Credit risk and universal banking: evidence from the banking industry in Ghana', Int. J. Computational Economics and Econometrics, Vol. 5,

Journal

International Journal of Computational Economics and EconometricsInderscience Publishers

Published: Jan 1, 2015

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