Determinants of Liquidity of Rural and Community Banks in Ghana
Eric Kofi Boadi *
School of Management and Economics, University of Electronic Science and Technology of China (UESTC), No. 4 Section 2, North Jianshie Road, Chengdu, 610054, People Republic of China and Faculty of Business and Management Studies, Koforidua Polytechnic of Ghana, P.O.Box 981, Koforidua, Ghana
Yao Li
School of Management and Economics, University of Electronic Science and Technology of China (UESTC), No. 4 Section 2, North Jianshie Road, Chengdu, 610054, People Republic of China
Victor Curtis Lartey
School of Management and Economics, University of Electronic Science and Technology of China (UESTC), No. 4 Section 2, North Jianshie Road, Chengdu, 610054, People Republic of China and Faculty of Business and Management Studies, Koforidua Polytechnic of Ghana, P.O.Box 981, Koforidua, Ghana
*Author to whom correspondence should be addressed.
Abstract
This study analyses the determinants of Rural and Community Banks (RCBs) liquidity performance in Ghana using the CAMEL regulatory measures and macroeconomic variables with RCBs’ market jurisdiction as a moderating variable. 114 rural and community bank-specific panel data from 2005 – 2013 and the panel least square fixed effect method estimation were used for the research. The result suggests that capital adequacy, asset quality, management efficiency and gross domestic product have significant positive relationship and effect on liquidity. It finds evidence to establish that profitability and management efficiency studied within a period reveal contradictory outcomes on banks’ liquidity performance. It also supports studies on performance of banks which show that macroeconomic variables on their performance have mixed outcomes. Further, it indicates that, whenever an investment is not done carefully it has a negative effect on RCBs’ liquidity performance. Also, market jurisdiction of rural and community banks has a significant effect on their liquidity performance.
Keywords: CAMEL, Rural Community Banks (RCBs), liquidity determinants, Ghana