Macroeconomic Sentiment and Bank Performance in Ghana: The Intervening Roles of Asset Quality and Management Efficiency

This study examines the empirical effect of macroeconomic sentiment on the performance of commercial banks in Ghana, under severe internal operating constraints and during periods of historic sovereign debt distress. Utilising aggregate country-level time-series data from Ghana over a 20-year period (2006–2025), the study employs a static Ordinary Least Squares (OLS) model with Newey-West (HAC) standard errors with a strict 1-lag structure. The model controls for Asset Quality and Management Efficiency and includes a binary dummy variable (D₂₀₂₂) to capture the structural break associated with the 2022 hyperinflation and debt-restructuring shock. Results show that Business Confidence is statistically significant and positive in explaining bank returns. The most important internal constraint to bank performance is, however, the efficiency of Management. Crucially, asset quality is significantly and positively correlated with returns. The 2022 crisis dummy picks up large realised losses on the Domestic Debt Exchange Program (DDEP). Bank managers must optimise internal cost-to-income through digital consolidation to safeguard interest margins against inflation overruns. Regulators must closely monitor the arbitrary indexing of risk premiums in commercial lending rates, which shields bank profits at the expense of pricing private-sector enterprises out of the formal credit market. This paper is among the first to empirically demonstrate how an African banking sector maintained structural profitability and achieved a post-crisis recovery despite permanently elevated levels of non-performing loans following a major sovereign default.