Assessing the factors that contribute to financial distress of financial institutions The case of Ghana

Abstract

The purpose of the study was to identify factors that contribute to financial distress of some financial institutions in Ghana. The study is a descriptive survey which covered financial institutions in the Effutu Municipality in the Central Region of Ghana. The purposive sampling technique was used to select 42 employees from GCB bank, Emesa Rural Bank, Akyempim Rural Bank, Zenith Bank and CBG Bank. Structured questionnaires were distributed to respondents and results from the study show that factors such as financial stress, inadequate capital, poor succession planning and governance, poor government policies, inadequate managerial skills and accounting systems and competition all leads to financial distress in banks in Ghana and moreover, the study found out that banks in Ghana can review the business plans of banks, cut down costs and also restructure their debts and renegotiate debts to improve liquidity of the banks. Thus, it is highly recommended for organizations to ensure that they budget carefully to avoid financial distress.