Risk management and performance of deposit money banks in Nigeria: A re-examination
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DOIhttp://dx.doi.org/10.21511/bbs.18(2).2023.10
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Article InfoVolume 18 2023, Issue #2, pp. 113-126
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Risks inherent in banking businesses should be managed to prevent financial losses to the sector’s stakeholders and negative externalities to the global economy. To this end, this study examines the effect of risk management on the performance of deposit money banks in Nigeria. A sample of eight (8) deposit money banks with international authorization are purposively selected out of 12 deposit money banks due to data availability. Panel data analysis techniques were adopted to analyze the secondary data that were obtained from the annual reports of banks. Findings based on the disaggregated model results reveal that both liquidity and capital risk variables exert a negative but insignificant effect on performance. However, credit risk drives performance of the internationally authorized banks positively and significantly. Furthermore, Management quality (MQ) is the only control variable that has a significant influence on the performance of the selected deposit money banks. The study concludes that credit risk and management quality significantly and positively drive performance among the financial entities.
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JEL Classification (Paper profile tab)G20, G21, O16
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References42
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Tables11
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Figures0
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- Table 1. Variables and definitions
- Table 2. Description of variables
- Table 3. Correlation matrix
- Table 4. Regression estimate
- Table 5. Panel GLS model showing aggregated risk management variable
- Table 6. Panel GLS model showing disaggregated risk management variable
- Table7. Panel GLS model showing credit risk effect on ROE
- Table A1. Normality test of data using the Jarque-Berra test
- Table A2. Multicollinearity test
- Table A3. Test for heteroskedasticity using Cameron & Trivedi’s (2005) decomposition test for heteroskedasticity
- Table A4. Auto correlation test. Wooldridge test for autocorrelation in panel data
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