Development of Financial Performance Assessment Indices for Bank Performance Rating in Ghana

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Farouq Sessah Mensah
Farouq Sessah Mensah
σ
Mohammed Aidoo
Mohammed Aidoo MSc Economics Commonwealth Executive Masters in Business Administration BA Economics Diploma in Education
α University of Cape Coast University of Cape Coast

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Development of Financial Performance Assessment Indices for  Bank Performance Rating in Ghana

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Abstract

Financial ratio analysis has been the ultimate tool for assessing the financial performance of organizations. However, given the increasing complexities in business operations in recent times, there is increasing shift to alternative methods that takes a multi-dimensional approach and combine several indicators to assess the financial performance of an organization. This study, therefore, aims at establishing Financial Performance Assessment Indices for evaluating banks performance in Ghana. Secondary data which spans over a 5-year period, covering 14 financial ratios on 24 registered banks in Ghana, was extracted from the annual Ghana Banking Survey reports. Analysing the data using descriptive statistics, ANOVA, and Principal Component Analysis technique, the study confirmed the existence of correlation among sets of financial ratios. The study also identified four basic Financial Performance Assessment Indices; Share of Industry Asset Index, Bank Profitability Index, Return on Bank Loan Index, and Liquidity Index. Among these indices, the Share of Industry Asset index and the Bank Profitability index constitute the most important for assessing the financial performance of banking institutions in Ghana.

References

8 Cites in Article
  1. James Ntiamoah Doku*,Raymond K. Dziwornu,Richard Agbanyo,Joyce Owusuaa Awuletey (2007). Loan syndication and cocoa production: Evidence from Ghana.
  2. Keshar Baral (2006). Determinants of Capital Structure: A Case Study of Listed Companies of Nepal.
  3. A Berger,D Humphrey (1997). Efficiency of financial institutions: International survey and directions for future research.
  4. (2010). Ghana - Securities & Stock Exchange.
  5. P Harker,S (2009). HISTORICAL SKETCH OF THE CAMBRIDGE UNIVERSITY PRESS.
  6. M Ncube (2009). Efficiency of the banking sector in South Africa.
  7. James Ntiamoah Doku*,Raymond K. Dziwornu,Richard Agbanyo,Joyce Owusuaa Awuletey (2005). Loan syndication and cocoa production: Evidence from Ghana.
  8. James Ntiamoah Doku*,Raymond K. Dziwornu,Richard Agbanyo,Joyce Owusuaa Awuletey (2008). Loan syndication and cocoa production: Evidence from Ghana.

Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Farouq Sessah Mensah. 2018. \u201cDevelopment of Financial Performance Assessment Indices for Bank Performance Rating in Ghana\u201d. Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 17 (GJMBR Volume 17 Issue C7): .

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Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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GJMBR-C Classification: JEL Code: E59
Version of record

v1.2

Issue date

January 15, 2018

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en
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Financial ratio analysis has been the ultimate tool for assessing the financial performance of organizations. However, given the increasing complexities in business operations in recent times, there is increasing shift to alternative methods that takes a multi-dimensional approach and combine several indicators to assess the financial performance of an organization. This study, therefore, aims at establishing Financial Performance Assessment Indices for evaluating banks performance in Ghana. Secondary data which spans over a 5-year period, covering 14 financial ratios on 24 registered banks in Ghana, was extracted from the annual Ghana Banking Survey reports. Analysing the data using descriptive statistics, ANOVA, and Principal Component Analysis technique, the study confirmed the existence of correlation among sets of financial ratios. The study also identified four basic Financial Performance Assessment Indices; Share of Industry Asset Index, Bank Profitability Index, Return on Bank Loan Index, and Liquidity Index. Among these indices, the Share of Industry Asset index and the Bank Profitability index constitute the most important for assessing the financial performance of banking institutions in Ghana.

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Development of Financial Performance Assessment Indices for Bank Performance Rating in Ghana

Mohammed Aidoo
Mohammed Aidoo
Farouq Sessah Mensah
Farouq Sessah Mensah University of Cape Coast

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