Corporate Governance and Financial Accountability Of Rural and Community Banks in Ghana

Abstract

ABSTRACT There are one hundred and forty-four Rural and community banks serving in all the districts in Ghana with a large and diverse stakeholder community. With the challenges that were brought about by the financial sector crisis followed by the myriad of reforms in the financial sector, it has become relevant to assess the readiness of all financial institutions for any further stir in the system. This study focuses its attention on the rural and community banking industry in Ghana. The study seeks to examine the corporate governance factors that determine the financial accountability of rural and community banks using regression analysis. Financial accountability was measured using quality index, transparency and disclosure score and compliance index. Corporate governance on the other hand took into consideration three dimensions namely board characteristics, external audit quality and Audit committees. These three dimensions have been recognised in prior literature as the most used determinants of corporate governance. The findings reveal that board independence, board structure, external audit fees, audit committee existence and audit committee expertise have a significant effect on financial accountability. The study therefore recommends that the rural and community banks should strive for independence of their boards, structure the leadership of the board in ways that allow for innovation and continuity, establish audit committees among others. This will be the way to go if rural and community banks should avert any crisis in the future and ensure continues survival.