Bank performance, governance structures and ICT investment among rural banks in an emerging economy

Purpose This paper evaluates how bank dynamics, governance structures and financial sector development drive rural banks’ information and communications technology (ICT) investment in the Ghanaian economy. Design/methodology/approach Data for the empirical inquiry were compiled from relevant sources including World Development Indicators (WDI), World Governance Indicators (WGI) and ARB Apex Bank from 2014 to 2020. Prais–Winsten panel corrected standard errors (PW-PCSE) was employed in estimating and verifying hypothesized relationships for the study. Findings The results suggest that return on assets (ROA) and bank size improve rural banks’ ICT investment. Moreover, telecommunication development and government effectiveness have significant positive impact on ICT investment among rural banks in the Ghanaian economy. The results further show that telecommunication development has a positive moderating effect on regulatory quality and ICT investment nexus among rural banks in Ghana. Financial development, inflation and liquidity risk were found to negatively affect ICT investment among rural banks in Ghana. Originality/value The study is premised on four main motivations; (1) the growing role that ICT plays in development outcomes and firm performance (FP), as well as its potential for comparatively increased penetration among African banks and banking institutions (2) the importance of governance for innovation and investment in ICT, (3) banking regulation and (4) gaps in the literature. Previous studies on ICT investment highlight its impact on profitability but little on determinants of banks’ ICT investment in the emerging market context, especially moderating role of governance and ICT diffusion.