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Viewing report
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DEBT POLICY AND PROFITABILITY OF COMMERCIAL BANKS IN GHANA. Edition No. 1
VDM Publishing House, Aug 2010, Pages: 84
The debt policy of commercial banks is important even though they are highly leveraged entities. The obvious lack of consensus on the appropriate capital structure requires a robust research methodology to study the profitability of these entities in a developing economy. Panel data analysis provides a robust result which indicates significant reliance on short term debt by commercial banks in Ghana. The debt policy of corporate entities is a strategic decision by the board of directors which can be derived from both national and international economic realities. The fact that levered firms can benefit from the so- called tax shield does not permit a highly regulated institution to deal with debt as a normal game. Bankruptcy cost, agency cost and managerial self interest should serve as corporate guiding posts. The negative relationship between commercial bank size and profitability, provides a signal to their management to be focused and set their strategic eyes on the dynamics of the banking indystry in Ghana.
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