EFFECT OF CAPITAL ADEQUACY ON BANK SUSTAINABILITY: A COMPARATIVE ANALYSIS BETWEEN NIGERIA AND GHANA

Capital is key to the survival of any organisation of which the bank is not excluded. Although the adequacy of capital is important to financial institutions, the issue of how much capital to maintain is still a puzzle to be unravelled. The study explores the impact of capital adequacy (CAPA) on bank sustainability proxied by Z-score (BZCO). The study employed a descriptive research design. The population of the study were banks of the two West African countries. Secondary data were sourced from the World Bank database for ten years. Diagnostic and stationarity tests were conducted. Error correction model was used to evaluate the effect of the regressors on the regressed and through the aid of the statistical package E- Views 9.0. From the results, it suffices to conclude that in Nigeria, evidence of a long-run relationship between BZCO and CAPA is seen, but the short-run dynamics are weak. But for Ghana, there is no evidence of a long-run relationship, and both the short-run and long-run models show weak explanations for the period studied. The study recommends that financial institutions (banks) should endeavour to maintain capital that is sufficient for safety and sustainability.