Journal of Business and Economic Development

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Portfolio Management and Profitability of Commercial Banks

Received: Nov. 11, 2020    Accepted: Nov. 23, 2020    Published: Nov. 30, 2020
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Abstract

Banks optimally invest to earn profit as they consider the associated risks with such portfolio management. Portfolio management is a medium by which the banks hold investment due from other banks, purchase Government securities and invest in subsidiaries. This paper investigates the effect of banks’ portfolio management on profitability. Five commercial banks that are listed on the Ghana Stock Exchange were randomly selected for the study. Data on the total market value of Government securities, investment in subsidiaries and due from other banks were collected from the Bank of Ghana and the Ghana Stock Exchange between 2008 and 2017. As panel study, we regress portfolio management on profitability. The findings show that holding of government securities and investing in subsidiaries have a significant positive effect on the profitability of banks in Ghana. The findings also show that non-performing loans have a significant negative effect on the profitability of the banks. Therefore, it is recommended that banks should develop a balance between holding government securities and investing in subsidiaries to improve upon its profitability. The banks should also double their efforts to reduce their non-performing loans by enhancing the skills of its officers, strengthening its due diligence procedures and intensify monitoring activities.

DOI 10.11648/j.jbed.20200504.17
Published in Journal of Business and Economic Development ( Volume 5, Issue 4, December 2020 )
Page(s) 244-248
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Portfolio Management, Performance, Investment, Banks, Profitability

References
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[2] Albertazzi, Ugo; Becker, Bo & Boucinha, Miguel (2018). Portfolio rebalancing and the transmission of large-scale asset programmes: Evidence from the euro area. European Central Bank. Working Paper Series. No. 2125/January 2018.
[3] Anbar, Adem & Alper, Deger (2011). Bank Specific and Macroeconomic Determinants of Commercial Banks Profitability: Empirical Evidence from Turkey. Business and Economics Research Journal. Vol. 2 (2). p. 139-152.
[4] Asiama, Rexford, K & Amoah, Anthony (2019). Non-performing loans and monetary policy dynamics in Ghana. African Journal of Economic and Management Studies. Vol. 10 (2), 169-184.
[5] Chakrabatrti, A., Singh, K., & Mahmood, I. (2007). Diversification and performance: evidence from East Asian firms. Strategic Management Journal. Vol. 28 (2), p. 101-120.
[6] Chen, Andrew H; Mazumdar, Sumon, C; Surana, Rahal (2014). China's Corporate Bond Market Development. Security Design Implications of Information Asymmetry. The Chinese Economy Journal. Vol. 44 (5), p. 6-33.
[7] Durbin, Erik & Ng, David (2005). The Sovereign ceiling and emerging market corporate bond spreads. Journal of International Money and Finance. Vol. 24 (4), p. 631-649.
[8] Hoshi, Takeo & Kashyap, Anil K.(2010). Will the U.S Bank recapitalization succeed? Eight lessons from Japan. Journal of Financial Economics. Vol. 97 (3), p. 398-417.
[9] Kyengo, Justus M., & Kilika, James (2017). Strategic Assets, Competitive Capabilities and Firm Performance: Review of the Literature. Journal of Business and Economic Development. Vol. 2 (3). P. 140-147.
[10] Lambert, C; Noth, F., and Schuwer, U. (2017). How do insured deposits affect bank risk? Evidence from the 2008 Emergency Economic Stabilization Act. Journal of Financial Intermediation. Vol. 29. p. 81-102.
[11] Ontita, Jane & Kinyua, Godfrey, Muigai (2020). Role of Stakeholders Management on Firm Performance: An Empirical Analysis of Commercial Banks in Nairobi City County, Kenya. Journal of Business and Economic Development. Vol. 5 (1). P. 26-35.
[12] Oyatoye, E. O., & Arilesere, W. O. (2012). A non-linear programimng model for insurance company investment portfolio management in Nigerian. International Journal of Data Analysis Techniques and Strategies. Vol. 4 (1), p. 83-100.
[13] Purkayastha, Saptarshi; Manolova, Tatiana, S., and Edelman, Linda, F. (2011). Diversification and Performance in Developed and Emerging Market Contexts: A Review of the Literature. International Journal of Management Reviews. Vol. 14 (1). p. 18-38.
[14] Sanya, S& Wolfe, S. (2011). Can Banks in Emerging Economies Benefit from Revenue Diversification? Journal Finance Services Research. 40, p. 79–101. https://doi.org/10.1007/s10693-010-0098-z.
[15] Williams, Emily, Costly External Financing and Monetary Policy Transmission: Evidence from a Natural Experiment (April 20, 2020). Available at SSRN: HYPERLINK "https://ssrn.com/abstract=3080665"\t"_blank" https://ssrn.com/abstract=3080665.
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  • APA Style

    Andrews Doeh Agblobi, Oscar Tornam Yaw Kuhorfah, Prisca Asamoah. (2020). Portfolio Management and Profitability of Commercial Banks. Journal of Business and Economic Development, 5(4), 244-248. https://doi.org/10.11648/j.jbed.20200504.17

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    ACS Style

    Andrews Doeh Agblobi; Oscar Tornam Yaw Kuhorfah; Prisca Asamoah. Portfolio Management and Profitability of Commercial Banks. J. Bus. Econ. Dev. 2020, 5(4), 244-248. doi: 10.11648/j.jbed.20200504.17

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    AMA Style

    Andrews Doeh Agblobi, Oscar Tornam Yaw Kuhorfah, Prisca Asamoah. Portfolio Management and Profitability of Commercial Banks. J Bus Econ Dev. 2020;5(4):244-248. doi: 10.11648/j.jbed.20200504.17

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  • @article{10.11648/j.jbed.20200504.17,
      author = {Andrews Doeh Agblobi and Oscar Tornam Yaw Kuhorfah and Prisca Asamoah},
      title = {Portfolio Management and Profitability of Commercial Banks},
      journal = {Journal of Business and Economic Development},
      volume = {5},
      number = {4},
      pages = {244-248},
      doi = {10.11648/j.jbed.20200504.17},
      url = {https://doi.org/10.11648/j.jbed.20200504.17},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.jbed.20200504.17},
      abstract = {Banks optimally invest to earn profit as they consider the associated risks with such portfolio management. Portfolio management is a medium by which the banks hold investment due from other banks, purchase Government securities and invest in subsidiaries. This paper investigates the effect of banks’ portfolio management on profitability. Five commercial banks that are listed on the Ghana Stock Exchange were randomly selected for the study. Data on the total market value of Government securities, investment in subsidiaries and due from other banks were collected from the Bank of Ghana and the Ghana Stock Exchange between 2008 and 2017. As panel study, we regress portfolio management on profitability. The findings show that holding of government securities and investing in subsidiaries have a significant positive effect on the profitability of banks in Ghana. The findings also show that non-performing loans have a significant negative effect on the profitability of the banks. Therefore, it is recommended that banks should develop a balance between holding government securities and investing in subsidiaries to improve upon its profitability. The banks should also double their efforts to reduce their non-performing loans by enhancing the skills of its officers, strengthening its due diligence procedures and intensify monitoring activities.},
     year = {2020}
    }
    

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    T1  - Portfolio Management and Profitability of Commercial Banks
    AU  - Andrews Doeh Agblobi
    AU  - Oscar Tornam Yaw Kuhorfah
    AU  - Prisca Asamoah
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    N1  - https://doi.org/10.11648/j.jbed.20200504.17
    DO  - 10.11648/j.jbed.20200504.17
    T2  - Journal of Business and Economic Development
    JF  - Journal of Business and Economic Development
    JO  - Journal of Business and Economic Development
    SP  - 244
    EP  - 248
    PB  - Science Publishing Group
    SN  - 2637-3874
    UR  - https://doi.org/10.11648/j.jbed.20200504.17
    AB  - Banks optimally invest to earn profit as they consider the associated risks with such portfolio management. Portfolio management is a medium by which the banks hold investment due from other banks, purchase Government securities and invest in subsidiaries. This paper investigates the effect of banks’ portfolio management on profitability. Five commercial banks that are listed on the Ghana Stock Exchange were randomly selected for the study. Data on the total market value of Government securities, investment in subsidiaries and due from other banks were collected from the Bank of Ghana and the Ghana Stock Exchange between 2008 and 2017. As panel study, we regress portfolio management on profitability. The findings show that holding of government securities and investing in subsidiaries have a significant positive effect on the profitability of banks in Ghana. The findings also show that non-performing loans have a significant negative effect on the profitability of the banks. Therefore, it is recommended that banks should develop a balance between holding government securities and investing in subsidiaries to improve upon its profitability. The banks should also double their efforts to reduce their non-performing loans by enhancing the skills of its officers, strengthening its due diligence procedures and intensify monitoring activities.
    VL  - 5
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    ER  - 

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Author Information
  • Department of Banking & Finance, University of Professional Studies, Accra, Ghana

  • Department of Banking & Finance, University of Professional Studies, Accra, Ghana

  • Department of Banking & Finance, University of Professional Studies, Accra, Ghana

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