Change management mechanism and its effect on the performance of banks

Banks in Ghana operate in a constantly evolving regulatory environment, making the management of regulatory changes critical to their survival and performance. Guided by institutional theory, this study assessed how banks effectively managed regulatory changes, focusing on the rise in minimum capital requirement for banks in Ghana between 2017 and 2018 as a case study. The study also assessed the effect of managing this regulatory change on bank performance. Data were collected through a structured questionnaire administered to 302 Branch Managers, complemented by interviews with 13 Managers directly involved in managing the capital increase in their respective banks. The study used mean and standard deviation to analyze how change management mechanisms were applied during the implementation of the new capital requirement. Additionally, a Structural Equation Model (SEM) was used to estimate the impact of these mechanisms on the banks' performance. The findings revealed that although the banks were initially unprepared for the increase in the minimum capital requirement, they effectively applied change management strategies. The study found that banks had effective communication, stakeholder management, sponsorship, and training, but readiness was very low. From the SEM results, sponsorship (β = 0.41) and stakeholder management (β = 0.39) have statistically significant positive effects on operational performance. However, communication (β = 0.24) and training (β = 0.31) have a statistically significant positive impact on financial performance. These findings are consistent with institutional theory as proposed by Meyer and Rowan. Thus, from the theoretical point of view, this study posits that change management is a sure way for banks to adapt to regulatory changes, such as a rise in minimum capital requirements. This study contributes to empirical literature since it is the first to assess how banks use change management mechanisms to manage regulatory change. The study recommends that banks proactively integrate regulatory change management strategies into their operations to better prepare for future regulatory shifts.