Assessing the Impact of Bank Liquidity on the Performance of Banks in Ghana

Abstract

The ability of banks to perform their core role effectively depends largely on liquidity. In this study, the main objective is to examine the impact of bank liquidity on the performance of banks in Ghana. The study used both regression (pooled regression) and descriptive methods. The main findings indicate that liquidity has a positive impact on the performance of the bank. Further, interest income, efficiency of management staff as bank-specific factors promote liquidity of the banks. For macroeconomic variables, exchange rate volatility showed a significant inverse effect on the liquidity. As policy implication, management should adopt best liquidity management practices and a more efficient and advanced approaches to improve efficiency. This can be achieved by taking advantage of the revolution in Information Telecommunication (IT) and the mobile telecommunication industry. Also, the banks should reduce their concentration of loans and diversified to other less risky but attractive areas such as investment into government securities.