Abstract:
ABSTRACT
This study examines the effect of financial risk management on the
profitability of commercial banks in Ghana using a balance panel of twenty
(20) commercial banks over ten time periods, spanning from 2011 to 2020
within a causal research design. The study considered net interest margin,
credit risk, liquidity risk, operational risk, bank size and leverage as variables
of interest. The study reveals that credit risk, liquidity risk and operational risk
as the independent variable of interest and leverage as a control variable have
negative and statistically significant effects on net interest margin. However,
company size has positive and statistically significant effects on net interest
margin. Therefore, the study recommends that Management of commercial
banks must take proper steps in managing financial risk indicators in order to
avoid it effects on their operations, sustenance, profits and growth due to the
turbulent competition in the industry. Management of commercial banks
should expand their size or operations to take advantage of economies of scale
for the purpose of achieving high profits. Finally, Management of commercial
banks should try to reduce leverage since it has a negative effect on
profitability.
