Liquidity Constraints and Tax Liability Targeting of Banks in Ghana: Analysis of Persistence and Distance to Target

Kwakye BOATENG; Kwame Bosiako OMANE-ANTWI; Yaw Ndori QUEKU

doi:10.2478/fman-2025-0017

Figures & Tables

Tax revenue-to-GDP
(Source: OECD Revenue Statistics, 2022) — Tax revenue-to-GDP (Source: OECD Revenue Statistics, 2022)

Framework for liquidity constraint-tax liability targeting, persistence, and delay to convergence
(Source: Authors’ Construct Developed from the Literature) — Framework for liquidity constraint-tax liability targeting, persistence, and delay to convergence (Source: Authors’ Construct Developed from the Literature)

Time-Varying Mean Trend of Cash Effective Tax Rate (CETR) of Banks in Ghana
(Source: Generated from Eviews version 12.0) — Time-Varying Mean Trend of Cash Effective Tax Rate (CETR) of Banks in Ghana (Source: Generated from Eviews version 12.0)

Disaggregated Observable Patterns in the CETR
(Source: Generated from Eviews version 12.0) — Disaggregated Observable Patterns in the CETR (Source: Generated from Eviews version 12.0)

Impulse Response: Degree of Persistence in Tax Liability Target
(Source: Generated from Eviews version 12.0) — Impulse Response: Degree of Persistence in Tax Liability Target (Source: Generated from Eviews version 12.0)

Persistence Analysis: Composite and Cross-Sectional Unit Root Test (Source: Generated from Eviews version 12_0)

Method	Statistic	Prob.^**
ADF, Fisher chi-square	226.312	0.0000
ADF, Choi Z-stat	-11.1493	0.0000

Descriptive Analyses of Tax and Liquidity Constraint Variables (Source: Generated from Eviews version 12_0)

	CETR	NDG	NLG	NLD
Mean	0.3129	-0.4182	-0.2427	-1.2871
Median	0.2686	-0.2230	-0.1673	-0.6010
Maximum	10.8066	0.9891	0.8773	0.0000
Minimum	-1.9509	-10.3252	-3.2301	-18.0997
Std. Dev.	0.6416	0.8575	0.3738	2.1419
CoV	2.0505	2.0505	1.5402	1.6641
Observations	3600	3600	3600	3600

Delay Measure, Half-Life, and Speed of Adjustment (Source: Generated from Eviews version 12_0)

Variable	Coefficient	Delay	Half-Life	^*SOA Rate per Month	Distance to Target in Month
NDG	-1.6031	0.1675	0.3880	257.73%	12 days
NLD	-0.3608	0.4108	0.7791	128.36%	23 days
NLG	0.9731	0.2743	0.5358	186.64%	16 days

j_jvetres-2024-0060_utab_001

Intermediate ADF test results: individual cross sections
Cross section	Prob.	Lag	Max Lag	Obs
ADB	0.3684	2	2	177
ABSA	0.0028	2	2	177
ACCESS	0.0049	2	2	177
BoA	0.0016	2	2	177
CAL BANK	0.0016	2	2	177
ECOBANK	0.0035	2	2	177
FNBBANK	0.1193	2	2	177
FIRST ATLANTIC	0.0018	2	2	177
NIB	0.0643	2	2	177
GT BANK	0.0002	2	2	177
PRUDENTIAL	0.0002	2	2	177
REPUBLIC	0.0005	2	2	177
STANBIC	0.0005	2	2	177
STANDARD CHARTERED	0.0036	2	2	177
UMB	0.0003	2	2	177
ZENITH	0.0029	2	2	177
FIDELITY	0.0011	2	2	177
SOCIETE G.	0.0143	2	2	177
GCB	0.0002	2	2	177
UBA	0.9016	2	2	177

Analysis of Liquidity Funds/Total Deposits (Source: Ghxana Banking Survey Report, 2023)

Banks	2022	R	2021	R	2020	R	2019	R	2018	R	2017	R
FBN	1.31	1	1.00	9	0.98	7	1.32	3	1.78	2	1.10	5
BOA	1.04	2	1.40	1	0.95	10	1.05	7	0.74	14	0.79	19
ABG	0.97	3	1.10	5	1.02	5	0.94	10	0.93	9	0.87	11
FBL	0.95	4	1.27	2	0.98	8	1.46	2	1.17	5	1.03	6
FNB	0.90	5	1.14	4	1.16	1	1.65	1	2.81	1	1.89	3
SCB	0.90	6	0.99	10	0.95	9	0.93	11	0.98	8	0.86	14
UBA	0.89	7	0.92	11	0.93	11	0.97	9	1.33	4	0.87	12
PBL	0.88	8	0.90	13	0.79	15	0.59	17	0.57	19	0.70	21
ABSA	0.82	9	1.16	3	1.02	6	1.25	5	1.13	6	0.69	22
OBL	0.82	10	0.92	12	0.73	19	0.00	-	0.00	-	0.88	10
ZBL	0.81	11	1.07	8	1.12	2	1.26	4	1.34	3	0.96	7
CBG	0.75	12	1.09	7	1.04	4	1.10	6	0.00	-	0.00	-
GCB	0.75	13	0.90	14	0.87	13	0.79	14	0.8	12	0.85	15
GTB	0.75	14	0.76	16	0.90	12	1.03	8	1.05	7	0.96	8
SBG	0.71	15	0.68	20	0.74	18	0.58	18	0.66	17	0.83	17
CAL	0.70	16	1.10	6	1.07	3	0.89	12	0.77	13	0.79	18
RBL	0.69	17	0.71	19	0.70	20	0.69	15	0.72	15	0.66	23
UMB	0.67	18	0.00	-	0.54	23	0.00	-	0.00	-	0.86	13
SG-GH	0.66	19	0.76	17	0.62	21	0.45	19	0.65	18	0.53	26
EBG	0.64	20	0.73	18	0.74	17	0.59	16	0.71	16	0.76	20
ADB	0.63	21	0.77	15	0.79	14	0.83	13	0.89	10	0.84	16
FABL	0.58	22	0.62	21	0.77	16	0.00	1	0.88	11	0.89	9

Banks’ Liquid Funds/Total Assets (Source: Ghana Banking Survey Report, 2023)

Banks	2022	R	2021	R	2020	R	2019	R	2018	R	2017	R
FBN	0.76	1	0.65	11	0.66	8	0.74	6	0.89	1	0.82	3
ABG	0.73	2	0.76	4	0.73	3	0.65	9	0.67	8	0.63	9
SCB	0.72	3	0.75	5	0.69	4	0.69	8	0.71	7	0.63	10
CBG	0.71	4	0.84	1	0.87	1	0.91	1	0.00	-	0.00	-
ZBL	0.70	5	0.77	3	0.81	2	0.85	2	0.83	2	0.72	8
OBL	0.69	6	0.70	7	0.63	11	0.00	-	0.00	-	0.62	12
UBA	0.69	7	0.71	6	0.68	7	0.77	4	0.79	4	0.61	14
FBL	0.68	8	0.78	2	0.69	5	0.73	7	0.75	6	0.76	4
GCB	0.63	9	0.68	9	0.68	6	0.62	10	0.63	11	0.62	13
BOA	0.59	10	0.65	10	0.55	19	0.57	13	0.47	16	0.52	22
GTB	0.59	11	0.56	17	0.66	9	0.75	5	0.76	5	0.75	7
SBG	0.58	12	0.55	18	0.59	17	0.45	17	0.48	15	0.56	18
PBL	0.57	13	0.59	15	0.49	21	0.39	18	0.42	18	0.47	25
FNB	0.57	14	0.61	12	0.59	16	0.82	3	0.81	3	0.75	6
RBL	0.56	15	0.54	19	0.53	20	0.53	14	0.55	13	0.54	19
EBG	0.55	16	0.60	14	0.60	13	0.49	15	0.53	14	0.60	16
ABSA	0.54	17	0.60	13	0.56	18	0.59	12	0.62	12	0.53	20
CAL	0.51	18	0.69	8	0.60	14	0.49	16	0.45	17	0.47	24
UMB	0.50	19	0.00	-	0.38	23	0.00	-	0.00	-	0.56	17
ADB	0.50	20	0.58	16	0.59	15	0.62	11	0.64	10	0.60	15
FABL	0.49	21	0.52	20	0.62	12	0.00	-	0.65	9	0.76	5
SG-GH	0.43	22	0.47	21	0.42	22	0.32	19	0.41	19	0.38	26

Correlation Matrix of Explanatory Variables (Source: Generated from Eviews version 12_0)

	CETR	NDG	NLG	NLD	AGE	BL	BS
CETR	1
NDG	-0.0251	1
NLG	-0.0092	0.1114	1
NLD	0.0573	-0.0059	0.0010	1
AGE	-0.0419	0.1322	0.2217	0.1136	1
BL	-0.0188	0.0505	0.1141	-0.1124	-0.0036	1
BS	-0.0206	0.1087	0.0985	0.2355	0.2332	0.0887	1

Tax Liability Targeting and Liquidity Constraints: DOLS Estimation (Source: Generated from Eviews version 12_0)

Variable	Coefficient	Std. Error	t-Statistic	Prob.
NDG	-1.6031	0.0852	-18.8198	0.0000
NLD	-0.3608	0.2022	-1.7842	0.0800
NLG	0.9731	0.1344	7.2383	0.0000
LAGE	0.6805	0.4541	1.4987	0.1398
LBS	-0.6407	0.1796	-3.5677	0.0008
BL	0.5050	0.7868	0.6418	0.5237
R-squared	0.9894	Mean dependent var		0.2953
Adjusted R-squared	0.9683	S.D. dependent var		0.2044
S.E. of regression	0.0364	Sum squared resid		0.0716
Long-run variance	9.35E-05

Descriptive Analyses of Control Variables (Source: Generated from Eviews version 12_0)

	AGE	BL	BS
Mean	31.2800	0.0899	3570000000
Median	23.2083	0.0601	2340000000
Maximum	126.0000	0.6289	25800000000
Minimum	1.0000	0.0000	0.000000
Std. Dev.	25.5988	0.0809	3790000000
CoV	0.8184	0.9019	1.0616
Observations	3600	3600	3600

Banks’ Liquid Funds to Total Interest Bearing Liabilities (Source: Ghana Banking Survey Report, 2023)

Banks	2022	R	2021	R	2020	R	2019	R	2018	R	2017	R
FBN	1.29	1	0.99	2	0.96	3	1.28	2	1.78	2	1.01	4
UBA	0.89	2	0.92	6	0.93	4	0.97	6	1.00	5	0.77	12
ABG	0.87	3	0.95	4	0.92	5	0.79	10	0.83	9	0.76	13
SCB	0.87	4	0.93	5	0.91	6	0.86	7	0.92	6	0.84	10
OBL	0.80	5	0.87	8	0.69	18	0.00	-	0.00	-	0.75	14
ZBL	0.80	6	1.03	1	1.05	1	1.08	3	1.04	4	0.88	9
BOA	0.75	7	0.87	9	0.82	8	0.81	8	0.59	16	0.63	22
GTB	0.74	8	0.75	14	0.88	7	1.03	5	1.04	3	0.94	6
FBL	0.73	9	0.88	7	0.80	11	0.81	9	0.85	8	0.88	8
CBG	0.71	10	0.98	3	1.01	2	1.08	4	0.00	-	0.00	-
GCB	0.71	11	0.84	10	0.81	9	0.75	12	0.77	11	0.75	15
SBG	0.71	12	0.68	19	0.73	14	0.57	17	0.65	15	0.80	11
FNB	0.68	13	0.81	11	0.81	10	1.56	1	2.81	1	1.89	2
ABSA	0.68	14	0.76	13	0.73	15	0.73	13	0.76	12	0.69	18
RBL	0.68	15	0.68	18	0.67	19	0.65	14	0.67	14	0.64	21
EBG	0.64	16	0.73	15	0.74	13	0.58	15	0.70	13	0.74	16
PBL	0.63	17	0.73	16	0.60	20	0.49	18	0.52	19	0.55	25
FABL	0.58	18	0.62	21	0.77	12	0.00	-	0.88	7	0.89	7
SG-GH	0.57	19	0.65	20	0.56	22	0.43	19	0.56	17	0.51	26
CAL	0.56	20	0.80	12	0.71	16	0.57	16	0.54	18	0.58	24
ADB	0.56	21	0.70	17	0.71	17	0.76	11	0.80	10	0.71	17
UMB	0.56	22	0.00	-	0.47	23	0.00	-	0.00	-	0.66	19
TCB	0.00	-	0.00	-	0.00	-	0.00	-	0.00	-	20.29	1
NIB	0.00	-	0.00	-	0.57	21	0.00	-	0.00	-	0.00	-
BOB	0.00	-	0.00	-	0.00	-	0.00	-	0.00	-	1.12	3
PRB	0.00	-	0.00	-	0.00	-	0.00	-	0.00	-	0.97	5
ECB	0.00	-	0.00	-	0.00	-	0.00	-	0.00	-	0.65	20
BSIC	0.00	-	0.00	-	0.00	-	0.00	-	0.00	-	0.60	23
TRB	0.00	-	0.00	-	0.00	-	0.00	-	0.00	-	0.26	27

Variable Description and Measurement (Source: Authors’ construct developed from varying literature)

Variables	Description	Measurements
TLT	Tax liability targeting	Cash Tax Paid (Pre Tax Income −special Items ) {{{\rm{ Cash Tax Paid }}} \over {{\rm{ (Pre Tax Income}}{{\rm{ }}_{{\rm{ - special Items }}}}{\rm{ ) }}}}
CETR	Cash effective tax rate
NLG	Negative loan growth	Loan growth rate multiplied by -1
NDG	Negative deposit growth	Deposit growth rate multiplied by -1
NLD	Negative loan deposit	Loan-to-deposit rate multiplied by -1
BS	Bank size	Log of total assets
BA	Bank age	Age of bank
BT	Bank tangibility	Carrying balance on PPE
BL	Bank leverage	Long-term liability to assets

Unit Root of the Residuals (Source: Generated from Eviews version 12_0)

Method	Statistic	Prob.**
Im, Pesaran and Shin W-stat	-7.11459	0.0000
ADF, Fisher chi-square	138.826	0.0000
PP, Fisher chi-square	164.969	0.0000

Liquidity Constraints and Tax Liability Targeting of Banks in Ghana: Analysis of Persistence and Distance to Target

Figures & Tables

Figure 1.

Figure 2.

Figure 3.

Figure 3.

Figure 5.

Persistence Analysis: Composite and Cross-Sectional Unit Root Test (Source: Generated from Eviews version 12_0)

Descriptive Analyses of Tax and Liquidity Constraint Variables (Source: Generated from Eviews version 12_0)

Delay Measure, Half-Life, and Speed of Adjustment (Source: Generated from Eviews version 12_0)

j_jvetres-2024-0060_utab_001

Analysis of Liquidity Funds/Total Deposits (Source: Ghxana Banking Survey Report, 2023)

Banks’ Liquid Funds/Total Assets (Source: Ghana Banking Survey Report, 2023)

Correlation Matrix of Explanatory Variables (Source: Generated from Eviews version 12_0)

Tax Liability Targeting and Liquidity Constraints: DOLS Estimation (Source: Generated from Eviews version 12_0)

Descriptive Analyses of Control Variables (Source: Generated from Eviews version 12_0)

Banks’ Liquid Funds to Total Interest Bearing Liabilities (Source: Ghana Banking Survey Report, 2023)

Variable Description and Measurement (Source: Authors’ construct developed from varying literature)

Unit Root of the Residuals (Source: Generated from Eviews version 12_0)

Paradigm

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