TITLE:
Moderating Role of Risk Management between Risk Exposure and Bank Performance: Application of GMM Model
AUTHORS:
Ivy Eklemet, John MacCarthy, Emmanuel Gyamera
KEYWORDS:
Credit Risk, Liquidity Risk, Market Risk, Operational Risk, Bank’s Performance, Ghana
JOURNAL NAME:
Theoretical Economics Letters,
Vol.14 No.2,
March
15,
2024
ABSTRACT: This paper assessed risk management as a moderating variable between risk
exposure and a bank’s performance. A quantitative research methodology was
employed to collect secondary data from 20 licensed banks in Ghana from 2013 to
2022, giving a total of 200 observations for this study. The study employed the
dynamic panel System Generalized Method of Moments to assess the effect of risk
exposure on the bank’s performance in Ghana. The Generalized Method of Moments
was employed in this research to control the issues of endogeneity and unseen
heterogeneity. Secondly, the result from the moderating analysis showed that
risk management moderates the negative relationship between risk exposure and
the bank’s performance. The findings highlight the importance of strengthening the corporate governance structure to
moderate or enhance the relationship between risk management and the bank’s
performance. The study recommended that the banks in Ghana ought to be more
proactive in their assessment and management of the bank’s credit risk and liquidity
risk to mitigate their adverse effect on the bank’s performance.