The study examined the efficiency performance of banks in Ghana for the period 2013 to 2020. The factors influencing banking efficiency in Ghana were also investigated, as well as the impact of banking consolidations on bank efficiency.
The study employed a two-stage approach to analyze the efficiency performance of banks in Ghana. In the first stage, the Data Envelopment Analysis (DEA) methodology is used to estimate the efficiency scores. In the second stage, bank-level, industry, and macroeconomic variables were employed to investigate the factors that influence the efficiency of banks in the Ghanaian banking industry.
The study results indicate that the efficiency scores of Ghanaian banks fluctuate between 0.600 and 0.800, suggesting that banks in Ghana could enhance their efficiency levels and conserve resources. Managerial inefficiency is revealed to be the main cause of bank inefficiencies in the Ghanaian banking industry. The results show that deposit utilization, gross loans to assets, bank profitability, and income diversification are other internal determinants of bank efficiency in the Ghanaian banking sector. Scale efficiency is shown to be impacted negatively by bank mergers and acquisitions.
The study recommends that the Bank of Ghana (BOG) should strengthen the banking sector governance rules and principles to ensure the right management teams are engaged to manage banking institutions in Ghana. Also, the regulator should not compel banks to merge in crisis times, since such policy directions may hurt bank efficiency performance.
