Internal determinants of bank deposit flows under different market conditions in Ghana

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This study analyzes the effect of internal factors of bank performance on deposit flows, considering the changes in the stock market conditions in Ghana. A panel dataset covering 2007 to 2021 of 18 banks in Ghana is applied in a dynamic panel model for the analysis. The results show that the lagged deposit growth exerts an impressive influence of 0.68 percent on the future deposit flows of banks, thus positing a favorable implication for their trading momentum. Also, liquidity was found to have a negative relationship of –0.64 percent with deposit growth. This implies that the holding of excess liquidity diminishes investors’ confidence in a bank’s ability to generate more revenue to enhance the value of their funds, as high liquidity ratios reduce the bank’s capacity to grant more loans for profit. Furthermore, the analysis revealed a positive effect of 1.93 percent by expenditure on deposit growth, which suggests that depositors recognize a rise in operational costs as an indication of a bank’s potential for growth and rapid expansion. Moreover, the analysis found the existence of a negative effect of –0.88 percent by the stock market conditions on deposit growth, which implies that bullish market conditions reduce bank deposits. This verifies that the determinants of deposit flows adapt to the changes in market conditions. Policy strategies should include non-performance metrics such as an increase in the interest paid on customers’ deposits, product promotions, and targeted advertisements to sustain the inflow of depositors’ funds under changing market conditions.

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    • Table 1. Descriptive statistics
    • Table 2. Correlation matrix
    • Table 3. Drivers of bank deposits under changing market conditions
    • Conceptualization
      Mulatu Fekadu Zerihun
    • Data curation
      Mulatu Fekadu Zerihun
    • Formal Analysis
      Mulatu Fekadu Zerihun
    • Investigation
      Mulatu Fekadu Zerihun
    • Methodology
      Mulatu Fekadu Zerihun
    • Project administration
      Mulatu Fekadu Zerihun
    • Resources
      Mulatu Fekadu Zerihun
    • Software
      Mulatu Fekadu Zerihun
    • Validation
      Mulatu Fekadu Zerihun
    • Visualization
      Mulatu Fekadu Zerihun
    • Writing – original draft
      Mulatu Fekadu Zerihun
    • Writing – review & editing
      Mulatu Fekadu Zerihun