Adebanjo Jospeh Falaye

This study examined the performance of selected quoted deposit banks of Nigeria and liquidity management. Secondary data used was extracted from the financial statements of 15 money deposit banks out of population of 17 deposit money banks on the Nigerian Stock Exchange (NSE) for 2012–2017 (six years). The descriptive research design was used. The data collected was analyzed using ordinary least square method (OLS). Liquidity management was measured using capital ratio (CTR), current ratio (CR) and cash ratio (CSR), while performance was measured using return on assets (ROA). Based on the results of the study, liquidity management proxied by capital ratio, current ratio and cash ratio and performance of the firm proxied by return on assets are positively related. The result shows that liquidity management is an essential factor in business operations and consequently leads to business profitability. Hence proper liquidity management helps solve the agency theory problem of agency costs that arise when control of companies is separated from the ownership, whereby managers are able to employ the firm’s resources for personal gains instead of maximizing the value of the firm or the shareholders’ wealth. The value of the firm and the shareholders’ wealth can be maximized through the firm’s profitability via effective and efficient liquidity management.