Regulation and performance of non bank financial institutions in Ghana
International Journal of Law and Management
ISSN: 1754-243X
Article publication date: 8 February 2016
Abstract
Purpose
The purpose of this study is to examine the relationship between regulation of non-bank financial institutions (NBFIs) and their performance in Ghana.
Design/methodology/approach
The analysis is performed using data derived from the Bank of Ghana Database during a five-year period, 2006-2010. Correlated panels corrected standard errors model is used to estimate the regression equation. Capital adequacy requirements and the restrictions on the ability of non-bank financial institutions (NBFIs) to take deposits are used as proxies for regulatory pressure. The study also used the return on assets (ROA) and return on equity (ROE) as measures of NBFI performance.
Findings
Results of the study emerged with the evidence that there exists a positive relationship between minimum capital adequacy requirement of 10 per cent and profitability. This indicates that asking NBFIs to keep higher minimum capital adequacy ratio has resulted in improving their profitability. This suggests that capital regulation is an effective tool in enhancing the stability and the profitability of the financial services sector. In addition, the paper finds a positive relationship between regulatory pressure in terms of restrictions on deposits and NBFI profitability. This means that non-deposit-taking NBFIs have improved performance. This indicates that restricting NBFIs in terms of deposit-taking rather goes to increase profitability.
Originality/value
The value of this study is in respect of its contribution to the extant literature on financial regulation and performance of NBFIs.
Keywords
Citation
Ofoeda, I., Gariba, P. and Amoah, L. (2016), "Regulation and performance of non bank financial institutions in Ghana", International Journal of Law and Management, Vol. 58 No. 1, pp. 108-125. https://doi.org/10.1108/IJLMA-11-2014-0060
Publisher
:Emerald Group Publishing Limited
Copyright © 2016, Emerald Group Publishing Limited