Rethinking Governance and Financial Stability: An Analysis of Board Composition and Bank Resilience in Ghana

Introduction This study explores the critical relationship between corporate governance practices and bank failures in Ghana, a matter that is central to the nation’s financial stability. Although Ghana’s banking sector has undergone substantial modernization, recent prominent failures have sparked doubts regarding the effectiveness of existing governance and regulatory frameworks, thereby motivating an empirical examination of the principal drivers of financial fragility. Methods This study quantitatively evaluates how core governance variables—namely board composition in terms of independence, size, and diversity—impact bank stability. Drawing on data from a sample of 30 banks, the research employs correlational and multiple regression techniques to examine the relationship between these governance practices and major financial distress metrics: the Non-Performing Loans (NPL) ratio, the Capital Adequacy Ratio (CAR), and the Regulatory Intervention Count. Results The findings indicate a nuanced relationship between board structure and bank stability. A robust positive correlation was observed between the NPL ratio and the number of regulatory interventions (r = 0.51), demonstrating that deteriorated asset quality primarily prompts regulatory action. Yet, multiple regression analysis revealed that the share of independent directors does not significantly predict the NPL ratio (p = 0.416). Importantly, the Board Diversity Index serves as a statistically significant positive predictor of a higher Capital Adequacy Ratio (p = 0.039), implying that banks with diverse boards sustain stronger capital buffers and enhanced financial resilience. Conclusions The study concludes that governance shortfalls meaningfully amplify financial distress in Ghana, but the influence of particular board features is complex. Conventional measures of board independence fail to predict bank failure indicators, whereas meaningful board diversity shows a strong link to increased stability. These results highlight the necessity for policymakers and regulators to move beyond mere structural compliance and to promote genuinely diverse boards and reinforce risk-management oversight. The study furnishes evidence-based insights for bolstering governance frameworks, thereby helping to avert future crises and foster a more resilient financial sector. JEL classification codes: G21, G28, G33, G34, E58, O55, M48