Corporate governance and profit productivity of listed banks in Ghana

Abstract

The study examined the impacts of corporate governance on the profit productivity of the listed banks on the Ghana Stock Exchange between 2010 and 2020. The study used eight banks listed on the Ghana Stock Exchange between 2010 and 2020. The study employed a non-parametric method of Data Envelopment Analysis at its first stage that determined the efficiencies of the banks. In addition, the Malmquist Productivity Index (MPI) is used to evaluate the banks’ total productivity change. The first stage results indicated that none of the listed banks achieved optimal operational efficiency. In addition, it was revealed that pure technical efficiency increased. The total productivity change analysis of the banks revealed that five of the eight (8) have their total factor productivity increased over time. The study used Random-Effects Generalized Least Squares Regression analysis at the second stage that examined the impacts of corporate governance variables on the profit productivity of the listed banks. The study concludes that increasing board size and diversity have increased bank profitability as board size and diversity boost GSE-listed bank profit productivity. Similarly, bank size and expansion in banking sector activities positively affect banks’ profit productivity. On the contrary, executive share compensation and financial leverage do not influence the profit productivity of the banks in any way. The study recommends that bank managers strengthen their managerial abilities to match technology improvements in the banking business. Boards should also improve bank directors' and executives' executive share compensation to incentivize them to accomplish more.