Credit Risk-Bank Size Trade-Off in the Banking Sector of Ghana

The stability and resilience of the banking sector are closely tied to how financial institutions manage credit risk (CRR) relative to their size. The credit risk–bank size trade-off has gained increasing scholarly attention, as it directly impacts the performance of banks, risk appetite, and regulatory oversight. Larger banks often enjoy economies of scale, diversified portfolios, and broader market access, which theoretically enhance their ability to absorb credit shocks. However, this size advantage may come at the cost of increased systemic risk, especially if such institutions take on excessive risk under the assumption of implicit government support.

This study analyzes how bank size relates to credit risk in Ghana, drawing on 2015–2023 panel data from eight domestic banks to inform banking regulation in developing economies.