The impact of non-performing loans on financial sustainability: Evidence from Commercial Banks in Ghana

The effect of Non-Performing Loans (NPLs) on the financial sustainability of Commercial Banks in the Ghanaian economy is the theme of this research, which seeks to fill a research gap, as previous research on this topic was largely conducted on the banking industry as a whole. Using structural equation modeling on the findings of a primary survey conducted among 226 senior professionals, this research finds that high levels of NPL have a negative effect on financial sustainability through their effect on profitability, capital adequacy, and overall resilience, and this effect is partly mediated by the effectiveness of risk management, which does not completely mitigate the effect. Macroeconomic volatility is found to have a moderating effect on the transmission of the negative effect of NPL, especially in turbulent economic conditions.