The Impact of Executive Compensation on Banking Performance: Evidence from the Ghanaian Banking Crises

Abstract

During the period 2012-2018, nine Ghanaian banks went bankrupt, causing depositors and shareholders to lose billions of Ghana Cedis. This development stunned the whole Ghanaian community, as many had not anticipated the occurrence of a banking crisis of that magnitude, since most of these banks were renowned indigenous banks. One of the fundamental causes of these banks’ failure was a lack of sound corporate governance practices. In this regard, the current study attempts to focus on one of the corporate governance practices—executive compensation—by giving an in-depth analysis of how poor executive compensation contributed to the failure of these banks. The study found that there was weak adherence to common execution compensation principles and practices of corporate governance. Banks did not have the appropriate compensation systems designed for the banks’ executives and non-executives. In addition, the compensation committee of some banks was not properly constituted whereas others had no compensation committee.