Apau, R.; Sibindi, A.; Jeke, L. Effect of Macroeconomic Dynamics on Bank Asset Quality under Different Market Conditions: Evidence from Ghana. Risks2023, 11, 158.
Apau, R.; Sibindi, A.; Jeke, L. Effect of Macroeconomic Dynamics on Bank Asset Quality under Different Market Conditions: Evidence from Ghana. Risks 2023, 11, 158.
Apau, R.; Sibindi, A.; Jeke, L. Effect of Macroeconomic Dynamics on Bank Asset Quality under Different Market Conditions: Evidence from Ghana. Risks2023, 11, 158.
Apau, R.; Sibindi, A.; Jeke, L. Effect of Macroeconomic Dynamics on Bank Asset Quality under Different Market Conditions: Evidence from Ghana. Risks 2023, 11, 158.
Abstract
This study assesses the dynamic relationship between macroeconomic factors and bank asset quality based on changes in the condition of stock market returns. A Generalized Method of Moments (GMM) model is employed, using panel data from 18 universal banks spanning the period 2007 to 2021. The analysis revealed that the real GDP growth rate, the average lending rate, and the real exchange rate represent a set of macroeconomic factors with a marked influence on banks' asset quality. In addition, a high inflation rate was found to exert an adverse effect on asset quality, as it affects borrowers' financial ability to meet loan repayment obligations. Furthermore, the study verified the existence of a positive relationship between market condition and asset quality, which implies that bank performance adapts to changes in market conditions as posited under the Adaptive Market Hypothesis (AMH). Bank managers should consolidate banks' asset bases during conditions of market stability to withstand periodic market fluctuations to boost trading momentum. Policy recommendations are suggested to foster a conducive business environment for bank stability.
Keywords
bank asset quality; real GDP; inflation; average lending rate; real exchange rate; changing market conditions
Subject
Business, Economics and Management, Finance
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
