Impacts of recapitalisation on the performance of universal banks in Ghana

Abstract

This study examined the impact of recapitalization on the performance of Universal banks in Ghana using profitability and liquidity ratios as the performance indicators. The study is based on samples of Fourteen (14) out of the 23 licensed commercial banks which were in existence as at 2010 and were able to meet the 2018 minimum capital requirement of GHS 400 million. The study measured the impact of recapitalization by comparing three years’ profitability and liquidity performance of licensed commercial banks against five years’ performance of these banks after the 2013 recapitalization starting from 2010 to 2017. The study adopted the t-test of equality of means and multiple regressions to find the impact on the profitability and liquidity of banks. The first finding concludes that, there was no significant difference between the mean ROE before the recapitalization and the mean ROE after the recapitalization exercise. On the other hand the second finding concludes that, the mean liquidity status of banks before recapitalization is significantly different from that of after recapitalization. The study concludes that recapitalization exercise helps increase liquidity of banks significantly but the ROE is was insignificant. The study recommends that Bank of Ghana should not undertake recapitalization exercise with the motive of increasing banks profitability but should find other innovative ways of making banks more profitable since recapitalization only enhances liquidity status of banks, but does not have any significant effect on banks profitability, so banks can increase their capital by issuing more shares to the public to avoid liquidity challenges.