Governance Deficits and Financial Fragility: An Analysis of Bank Failures in Ghana

Forkuo, Gabriel Osei and Emmanuel, Osei-Dwomoh and Nkuah, Joseph Kofi (2025): Governance Deficits and Financial Fragility: An Analysis of Bank Failures in Ghana.

Abstract

This study explored the critical relationship between corporate governance practices and the incidence of bank failures in Ghana, a key issue for the nation's financial stability and economic resilience. While Ghana's banking sector has undergone significant modernization, recent high-profile bank failures have cast doubt on the effectiveness of existing governance and regulatory frameworks. This research quantitatively investigates how core governance factors—specifically board composition, risk management, and regulatory compliance—influence bank stability. Analyzing data from 30 banks, the study employs descriptive, correlation, and regression analyses to assess governance practices and their linkage to financial distress indicators. The findings reveal a significant relationship between board independence, robust risk management, regulatory compliance, and a reduced likelihood of bank failure. Notably, a higher proportion of independent directors and stronger adherence to regulatory and corporate governance codes are associated with lower non-performing loan ratios and fewer regulatory interventions. These results highlight persistent gaps in governance that contribute to financial distress and underscore the necessity of strengthening Ghana's banking oversight. The study provides valuable, evidence-based insights for policymakers, regulators, and banking institutions on enhancing governance frameworks to prevent future crises and foster a more resilient financial sector.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corporate Governance, Bank Failures, Financial Stability, Board Composition, Regulatory Compliance, Risk Management, Ghana
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E61 - Policy Objectives ; Policy Designs and Consistency ; Policy Coordination; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy ; Stabilization ; Treasury Policy; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E66 - General Outlook and Conditions; G - Financial Economics > G2 - Financial Institutions and Services; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance ; Insurance Companies ; Actuarial Studies; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors; G - Financial Economics > G2 - Financial Institutions and Services > G24 - Investment Banking ; Venture Capital ; Brokerage ; Ratings and Ratings Agencies; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation; H - Public Economics > H5 - National Government Expenditures and Related Policies

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