A Panel Regression Analysis to Determine Returns on Assets of Banks in Ghana
Quaicoe, M.T., Twenefour, F.B.K., Addor, J.A. and Baah, E.M
ABSTRACT
This article aimed at examining the determinants of the returns on assets of banks using a panel regression analysis. The explanatory variables considered in the regression model were Capital Adequacy, Assets Quality, Management Quality and Liquidity Ratio. The effects of the explanatory variables on the returns on assets were explored by fitting a panel multiple regression model to the data. The results of the study show that the observed returns across the banks do not change over time, thus indicating that the series is stationary. There is evidence of significant differences across the banks considered for the study, hence the use of Random effects model. All the explanatory variables considered in the study including the intercept were found to have significant effects statistically on the returns on assets across the banks. About 73% of the variations in the returns on assets across the banks can be accounted for by the independent variables.
KEYWORDS: Fixed effect, Heteroscedasticity, Multicollinearity, Panel data, Random effects model, Returns on assets