Abstract:
The study sought to determine the effect of credit risk management on
financial performance of commercial banks listed on the Ghana Stock
Exchange. It employed the quantitative research approach and explanatory
design of which the targeted all commercial banks listed on the Ghana Stock
Exchange (GSE) for the period 2014 – 2018. However, only 10 commercial
banks with accurate information about their financial statements from 2014 to
2018 were considered in this study. The study employed the panel data
analysis structured on the Ordinary Least Squares (OLS) regression method to
examine the relationship between credit risk management and banks‘
performance. This was done with the aid of multiple regression technique of
the Statistics and Data software (STATA version 14.0). Leverage Ratio (TDA)
has negative relationship with the financial performance (ROA) of selected
listed commercial banks in Ghana. Furthermore, Non-Performance Loan Ratio
(NPLR) has negative relationship with the financial performance (ROA) of
commercial banks. Therefore, the study recommended that the Bank of Ghana
should encourage Commercial banks to reduce their lending rates prudently
and other fees and commission charge or even try to waive some charges on
banking services. Also, Commercial banks should boast the confidence of
their customers to deposit more by keeping adequate liquidity, capital levels
and quality assets on their books. Due to the negative relationship between
Non-Performing Loans Ratio (NPLR) on performance, commercial banks
should be critical in given out loans and how they are retrieved on time.
