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This study aimed to investigate the drivers of operational efficiency in rural banks within the Ghanaian context, taking into account factors such as size, financial performance, liquidity, ICT investment, and income diversification. Using financial data from 122 rural banks from 2014 to 2020, this study employed the Prais-Winsten panel corrected standard errors (PCSE), feasible generalized least squares (FGLS), and pooled panel OLS techniques to examine the interactions among these variables after testing for multicollinearity, cross-sectional dependence, stationarity, and Westerlund cointegration. This study reveals that, ceteris paribus, larger rural banks are not operationally efficient across all estimations. The quadratic term of bank size indicates that increased size amplifies the decline, resulting in sharper drop in efficiency. Furthermore, income diversification significantly reduces the operational efficiency of banks in Ghana. Interestingly, net interest margin, liquidity, information, communication and technology investments significantly improve the operational efficiency of banks, ceteris paribus. Furthermore, ICT investment negatively moderates the relationship between bank size and efficiency. Previous literature has explored operational efficiency drivers in varied jurisdictions; however, emphasis has been on commercial banks rather than rural banks. Considering the enormous contribution of rural banks to Ghana's financial system, these results are timely in aiding policy directions on banks’ efficiency, performance, and ICT diffusion.

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Unlocking Factors Influencing Rural Banks’ Operational Efficiency in Ghana: Evidence from Panel Models Robust to Cross-Sectional Dependence

  • 会议论文

  • 发表日期：

    2026年

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  • Louis David Junior Annor,
  • Bright Ferguson Laing,
  • John Agyekum Addae,
  • Barbara Naa Amanuah Tetteh,
  • Eric Kweku Attefah

摘要

This study aimed to investigate the drivers of operational efficiency in rural banks within the Ghanaian context, taking into account factors such as size, financial performance, liquidity, ICT investment, and income diversification. Using financial data from 122 rural banks from 2014 to 2020, this study employed the Prais-Winsten panel corrected standard errors (PCSE), feasible generalized least squares (FGLS), and pooled panel OLS techniques to examine the interactions among these variables after testing for multicollinearity, cross-sectional dependence, stationarity, and Westerlund cointegration. This study reveals that, ceteris paribus, larger rural banks are not operationally efficient across all estimations. The quadratic term of bank size indicates that increased size amplifies the decline, resulting in sharper drop in efficiency. Furthermore, income diversification significantly reduces the operational efficiency of banks in Ghana. Interestingly, net interest margin, liquidity, information, communication and technology investments significantly improve the operational efficiency of banks, ceteris paribus. Furthermore, ICT investment negatively moderates the relationship between bank size and efficiency. Previous literature has explored operational efficiency drivers in varied jurisdictions; however, emphasis has been on commercial banks rather than rural banks. Considering the enormous contribution of rural banks to Ghana's financial system, these results are timely in aiding policy directions on banks’ efficiency, performance, and ICT diffusion.