Publication Date


Document Type


First Advisor

Ryu, Duchwan

Degree Name

M.S. (Master of Science)

Legacy Department

Department of Statistics and Actuarial Science


Existing empirical literature on the relationship between credit risk and bank’s profitability is replete with mixed results. This research investigates the probable effect of credit risk on banks’ profitability by examining the nature of the relationship between two measures of credit risk (Loss provisioning rate and Actual provisioning charge rate) and two measures ofprofitability (Return on assets and Return on Equity). The investigation is conducted using data on the Ghanaian banking industry. Various modeling techniques are used to fit the data, including frequentist beta regression and Bayesian beta regression models. The results across all models suggest negative linear relationship between actual impairment charge rate and profitability, and a curvilinear relationship between impairment allowance rate and profitability. The curvilinear relationship is contrary to the positive linear relationship suggested by previous studies.


91 pages




Northern Illinois University

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