M.S. (Master of Science)
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.
Ekpe, Godwin Kwabla, "The Relevance of Credit Risk in the determination of Commercial Banks’ Proﬁtability: Evidence From Ghana" (2021). Graduate Research Theses & Dissertations. 6998.
Northern Illinois University
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