Executive compensation, ownership structure and loan quality of banks in Ghana

Abstract

This paper analyses the effects of executive compensation and ownership structure on loan quality of banks. The study uses a panel data on 26 Ghanaian banks over the period, 2003–2011.Using a dynamic panel model, estimations are made using the Generalized Method of Moments. The results show that management is efficient when director shareholding is very prominent in banks. Institutional ownership and public listing of banks also have a significantly negative relationship with non-performing loans, while lag of non-performing loans, equity ratio, exchange rate depreciation and increases in net interest margins are seen to have a negative effect on loan quality. Executive compensation had no significant effect on loan monitoring.