ABSTRACT: A study was conducted in order to analyze the impact of loan defaults on Ecobank's financial performance from 2009 to 2018. The study employed an explanatory design in order to determine how much of an influence loan defaults have on a bank's profits. Ecobank's published yearly financial statements and …
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ABSTRACT: A study was conducted in order to analyze the impact of loan defaults on Ecobank's financial performance from 2009 to 2018. The study employed an explanatory design in order to determine how much of an influence loan defaults have on a bank's profits. Ecobank's published yearly financial statements and reports for the research period were used as the only source of secondary data. The data was analyzed using quantitative methods that emphasized descriptive and inferential statistics. Correlation and multiple linear regression models were used to figure out how important the effect of the independent variable on the dependent variable was. Findings on the composition of loan default at the bank showed that the Sub-standard Asset (SSA) constituted 21.0%, the Doubtful Asset (DA) also constituted 27.8% while the Asset Loss (AL) constituted 52.2%. The findings regarding the trend of Asset Loss component of the loan default of the bank for the period 2009 to 2018 showed that since 2011, there has been a downward trend of the Asset loss to 2014 until it went up in 2015 and 2016 and then declined from 2017 to 2018. The regression analysis showed a significant relationship between loan default and financial performance as suggested by the ANOVA results (p<0.005). Specifically, the summary of individual independent variables impacting or influencing the financial performance (ROE and ROA) showed that there is no significant relationship between Sub-standard Asset and the banks performance at (p<0.005). TABLE OF CONTENTSPageDECLARATION iiABSTRACT iiiKEY WORDS ivACKNOWLEDGEMENT vDEDICATION viTABLE OF CONTENTS viiLIST OF TABLES xiLIST OF FIGURES xiiLIST OF ACRONYMS xiii CHAPTER ONEINTRODUCTIONBackground to the Study 2Statement of the Problem 4Purpose of the Study 5Objectives of the Study 5Research Questions 5Research Hypothesis 6Significance of the Study 6Delimitations 8Limitations 8Definition of Terms 9Organization of the Study 10 CHAPTER TWOLITERATURE REVIEWIntroduction 11Theoretical Framework 11Agency Theory 12The Concepts of Loans 12Concept of Loan Default 13Types of Loan Default 13Causes of Loan Default 14Financial Performance 15Measuring Financial Performance 16Effects of Loan Default 17Bank Banks of Ghana 19Empirical Review 20Research Gap 22Conceptual Framework of the Study 23Explanation of the Framework 23Chapter Summary 24 CHAPTER THREERESEARCH METHODSIntroduction 25Study Design 25Study Setting (Profile of EcobankLimited) 26Population 27Sample and Sampling Procedures 27Data Collection Instruments 28Validity and Reliability 28Data Collection Procedures 29Data Analysis 29Theoretical Model 29Time Series 30Study Variables 30Independent Variables 31Dependent Variables 31Empirical Models 32Econometric Estimation Technique 34Unit Root Test 34Cointegration Test (Johansen Approach) 34Ethical Consideration 35Chapter Summary 36 CHAPTER FOURRESULTS AND DISCUSSIONIntroduction 37Descriptive Statistics 38The Composition of Loan Default at ECOBANK LTD 40The Trend of Loan default at ECOBANK LTD 41Impact of Loan Default on Financial Performance of Ecobank Limited Bank Bank Ltd. 43Impact of Loan Default on Bank Performance (ROE) 44Impact of Loan Default on Financial Performance (ROA) 46Hypothesis Testing Results 49Unit Root Test 50Test for Cointegration 51Discussion of Results 52Research Question One: What is the Composition or Component of Loan Default at ECOBANK LTD? 52Research Question Two: What has been the Trend of Loan Default at ECOBANK LTD for the Past Ten Years? 53Research Question Three: What is the Impact of Loan Default on Financial Performance of ECOBANK LTD? 54Chapter Summary 56 CHAPTER FIVESUMMARY, CONCLUSIONS AND RECOMMENDATIONSIntroduction 58Summary 58Conclusions 61Recommendations 62Suggestions for Future Studies 63REFERENCES 64APPENDIX A 73 <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height: 200%;tab-sto
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