Journal for Studies in Management and Planning http://edupediapublications.org/journals/index.php/JSMaP/ Available at e-ISSN: 2395-0463 Volume 02 Issue 3 March 2016 Available online: http://edupediapublications.org/journals/index.php/JSMaP/ Page | 89 Credit Risk and Bank Profitability: Evidence from Ghana Stock Exchange Richard Takyi Opoku ; Peter Lawer Angmor ; Lawrence Asare Boadi Department of Banking and Finance Faculty of Accounting and Finance University of Professional Studies, Accra, Ghana o.takyi@yahoo.com Department of Accounting and Finance Faculty of IT Business Ghana Technology University College, Accra, Ghana aplawer@yahoo.com Department of Finance and Accounting ASN Investment Ltd, Accra, Ghana Correspondence: aplawer@yahoo.com Abstract This study analyzed the relationship between credit risk and profitability of banks on the Ghana Stock Exchange. A secondary data in a panel form of seven banks listed on the Ghana Stock Exchange was examined over a period of nine years, using a linear multiple regression model. One key measure of profitability was analyzed in this study that is return on equity. The independent variables included in the regression model were non- performing loan to total loans and advances, and loans and advances to total deposits, bank size, leverage and growth. The results for the study indicate that non-performing loan to total loans and advances and loans and advances to total deposits have significant negative relationship with return on equity. Furthermore, a negative insignificant relationship was established between size and return on equity but significant positive relationships were found between growth and leverage and profitability. It was recommended that Credit officers should ensure that customers looking for loans meet all the necessary requirements through proper due diligence. Key words: Credit risk, Profitability, Ghana Stock Exchange, panel data, regression 1.0 Introduction Banks are relevant to economic development through the financial services they provide. Their intermediation role can be said to be a catalyst for economic growth. The efficient and effective performance of the banking industry over time is an index of financial stability in any nation. It is believe that the extent to which a bank extends credit to the public for productive activities accelerates the pace of a nation’s economic growth and its long-term sustainability (Funso et al 2012). Credit creation is the main income generating activity for banks, but this activity involves huge risks to lenders. A bank with high credit risk has high bankruptcy rate and that puts depositors in a dangerous state and may even lead to bad reputation, withdrawal of license or even the collapse of the bank. However, in a bid to survive and maintain adequate profit level in this highly competitive environment, banks tend to take excessive risks, yet, the increasing tendency for high risk taking has resulted in insolvency and failure of a large number of banks all over the world.