RISK-ASSETS QUALITY AND FINANCIAL PERFORMANCE OF QUOTED DEPOSIT MONEY BANK IN NIGERIA
Keywords:
Risk Assets, Asset Quality, Non-Performing Loan, Financial Performance, Return on Equity
Abstract
This study empirically explores the effect of risk asset quality through the non-performing loans on the financial performance of quoted deposit money banks. Data on different type of asset quality and financial performance from 2000-2020 were collected from website of the quoted deposit money banks, central bank of Nigeria reports and Nigeria stock exchange. Ordinary least square regression analysis, descriptive statistics, autoregressive distribution lag, co-integration, granger casualty, unit root test and error correction model were used in analyzing the data with the aid of E-view version 12. The study observed that non-performing loan shows a negative and significant influence on the return on asset of sampled deposit money banks in Nigeria.The study concludes byreaffirming the importance of maintaining high-quality assets for deposit money banks as poor asset quality, as indicated by a high level of NPLs, can erode the bank's profitability, and by extension, its ROE.The study recommends that the regulators and supervisory authorities need to closely monitor and address NPLs in the banking sector. High NPLs can not only affect individual bank stability but also have systemic implications for the overall health of the financial system. Regulatory frameworks that encourage prudent lending practices and the maintenance of healthy asset quality are crucial.
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References
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Abebe, A.K., & Abera, M.T (2019). Determinants of financial performance: Evidence from Ethiopia insurance companies. Journal of Accounting, Finance and auditing Studies, 5(1),155-172
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Al-abedellat, A.Z.(2019). The factors affecting the performance of the Jordanian banks using camels model. European Journal of Scientific Research, 152(2),116-127
Alhassan., Celeman and Andoh (2020). Asset quality in a crisis period: An empirical examination of Ghanaian banks. Review of Development Finance, 4(3),50-56
Almajali, A.Y., Alamro, S.A & Al-Soub, Y.Z(2020). Factors affecting the financial performance of Jordankian insurance companies listed at Ammon Stock Exchange. Journal of Management Research, 4(2), 260-266.
Amida, M.M.&James, D.C. (2021). Relationship between asset quality and financial performance of commercial banks before and after shifting capital city located to Dodoma Region Tanzania. International Journal of Multidisciplinary Research and Explorer (IJMRE), 1(9),149-157
Aymen, B. M. M. (2013). Impact of capital on financial performance of banks: the case of Tunisia. Banks & bank systems, 8(4), 47-54.
Bekhat, H.A., Alsmadi, A.M. &Khudari, M. (2020). Effects of internal and external factors on profitability of Jordanian commercial banks: Panel data appROEch. International Journal of Finance Research, 11(5),359-375
Dang, U. (2011). The CMEL rating system in bank supervision: A case study. Helsinki, Finland: Degree Thesis, Arcadauniversity of Applied Sciences.
Ezeohua, A.E(2021). Banking consolidation credit crisis and assets quality in a fragile banking system. Some evidence from Nigeria data. Journal of financial Regulation and Compliance, 19(1), 33-44
Jackson, O(2021). The impact of credit risk management on financial performance of commercial banks in Kenya. African Journal of Management Policy, 3(7),179-217
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Kafidipe, A., Uwalomua., U., Okeme, F., Dahunsi, O. &Ojone, F.(2021). Corporate governance, risk management and financial performance of listed deposit money bank in Nigeria. Journal of Accounting, 6(2),70-80
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Nwaiwu, F. (2018). Review and comparison of conceptual frameworks on digital business transformation. Journal of Competitiveness, 7(3), 109-118.
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Olaoye, C.O. &Alade,E.O. (2019). Effect of corporate tax and profitability of deposit money banks in Nigeria. Journal of Economics and Behavioral Studies, 11(1), 191-201
Olobo, M., Karyeija, G., Saude, P. &Khoch (2021). Credit risk management practices and performance of commercial banks in Erath Sudan. Journal of Financial Risk Management, 10(3),306-316
Ombaba, K.B(2020). Assessing the factors contributing to non-performance loans in Kenyan banks. European Journal of Business and Management, 5(32),20-33
Ombaba, K.B.(2013). Assessing the factors contributing to non-performance loans in Kenyan banks. European Journal of Business and Management, 5(32),20-33
Omodero, C.O. & Ogbonnaya, A.K. (2018). Corporate tax and profitability of deposit money banks in Nigeria. Journal of Accounting, Business and Finance Research, 3(2),47-55
Ongeri, N.B., Nyangan, A. &Nyaboga, Y. (2021). Evaluation of the effect of credit evaluation on financial performance of commercial banks in Kisii county, Kenya. International Academic Journal of Economics and Finance, 3(2),345-361
Ongore, O., & Kusa, B(2020). Determinants of financial performance of commercial banks in Kenya. International Journal of Economics and Financial Issues, 3(1),237-252
Onsongo, S. K., Muathe, M.A. & Mwangi, L.W. (2020). Financial risk and financial performance: Evidence and insights from commercial and services listed companies in Nairobi securities exchange, Kenya. International Journal of Financial Studies, 8(3),1-15
Owojori, A. A., Akintoye, I. R., &Adidu, F. A. (2011). The challenge of risk management in Nigerian banks in the post consolidation era. Journal of Accounting and Taxation, 3(2), 23-31.
Pradip, K.D.(2017). Impact of return on capital employed on company performance: An introspection in India. Saudi Journal of Business and Management Studies, 2(9),848-853
Rose, F. (2017). Working capital management and firm performance of small and large firms in Malaysia. Journal of Global Business and Social Entrepreneurship (GBSE), 3(7), 166-177.
Shafiq, K., & Nasr, O. (2015). Credit risk management: Implications on bank performance and lending growth. Saudi Journal of Business and Management Studies, 2, 584-590.
Singh, K., Misra, M., Kumar, M. & Tiwari, V. (2019). A study on the determinants of financial performance of U.S. agricultural cooperatives. Journal of Business Economics and Management, 20(4),633-647
Sufian, F. & Chong, R.R.(2019). Determinants of bank profitability in a developing economy: Empirical evidence from the Philippines, Asian Academy of Management Journal of Accounting & Finance, 4(2),546-549
Thiajarajan, S., Ayyappan, S. &Ramaachandran, A(2021). Credit risk determinants of public and private sector banks in India. European Journal of Economics, Finance and Administrative Sciences, 3(4),45-57
Ugoani, J.N. (2016). Non-performing loans portfolio and its effect on bank profitability in Nigeria.Independent Journal of Management & Production, 7(2),303-319
Zhangi, Y.(2021). Documentary letter of credit fraud risk management.Journal of Financial Crime, 19(4),343-354.
Zribi, N., &Boujelbene, Y. (2021). The factors influencing bank credit risk: The case of Temisa. Journal of Accounting and Taxation, 3(4),2-19.
Abebe, A.K., & Abera, M.T (2019). Determinants of financial performance: Evidence from Ethiopia insurance companies. Journal of Accounting, Finance and auditing Studies, 5(1),155-172
Abraham, E. A., & Anifowose, O.M. (2020). Assessment of risk management on construction project in Abuja, Nigeria. Proceeding of the 5th research conference of the NIQs, 5(3),546-558
Adegbite, T.M. Kumi, J.A. & Kumi, M.A. (2018). The effects of corporate income tax on the profitability of mining companies: Evidence from Ghana Stock Exchange. Journal of Business Management, 4(2),55-64
Adeolu, A.M (2014). Asset quality and bank performance: A study of commercial banks in Nigeria.Research Journal of Finance and Accounting, 5(18),39-44
Al-abedellat, A.Z.(2019). The factors affecting the performance of the Jordanian banks using camels model. European Journal of Scientific Research, 152(2),116-127
Alhassan., Celeman and Andoh (2020). Asset quality in a crisis period: An empirical examination of Ghanaian banks. Review of Development Finance, 4(3),50-56
Almajali, A.Y., Alamro, S.A & Al-Soub, Y.Z(2020). Factors affecting the financial performance of Jordankian insurance companies listed at Ammon Stock Exchange. Journal of Management Research, 4(2), 260-266.
Amida, M.M.&James, D.C. (2021). Relationship between asset quality and financial performance of commercial banks before and after shifting capital city located to Dodoma Region Tanzania. International Journal of Multidisciplinary Research and Explorer (IJMRE), 1(9),149-157
Aymen, B. M. M. (2013). Impact of capital on financial performance of banks: the case of Tunisia. Banks & bank systems, 8(4), 47-54.
Bekhat, H.A., Alsmadi, A.M. &Khudari, M. (2020). Effects of internal and external factors on profitability of Jordanian commercial banks: Panel data appROEch. International Journal of Finance Research, 11(5),359-375
Dang, U. (2011). The CMEL rating system in bank supervision: A case study. Helsinki, Finland: Degree Thesis, Arcadauniversity of Applied Sciences.
Ezeohua, A.E(2021). Banking consolidation credit crisis and assets quality in a fragile banking system. Some evidence from Nigeria data. Journal of financial Regulation and Compliance, 19(1), 33-44
Jackson, O(2021). The impact of credit risk management on financial performance of commercial banks in Kenya. African Journal of Management Policy, 3(7),179-217
Jaffe, M., Jeffrey, T., &Westerfiled, S. (2014). Impact of political and catastrophic events on stock returns. Available at SSRN 2528116.
James, J.U. (2021). Capital adequacy and profitability of banks in Nigeria. International Journal of Accounting and Finance, 5(4),25-33
Kafidipe, A., Uwalomua., U., Okeme, F., Dahunsi, O. &Ojone, F.(2021). Corporate governance, risk management and financial performance of listed deposit money bank in Nigeria. Journal of Accounting, 6(2),70-80
Kolapo, T.F, Ayeni, R.K &Oke, M.O(2020). Credit risk and commercial banks’ performance in Nigeria: A panel Australian Journal of Business Management Research, 2(2),31-42
Lone, F.A. & Ahmad, S. (2017). Islamic finance: More expectations and less disappointment. Journal of Financial Intermediation, 5(2),174-183
Muraina, S.A(2018). Determinants of listed deposit money banks profitability in Nigeria. Robia, I., Salim, R & Bloch, H.(2018) Financial performance of commercial banks in the post-reform era: Further evidence from Bangladesh. Economic Analysis and Policy, 5(8),43-45
Musyoki, D. &Kadubo, A.S(2021). The impact of credit risk management on the financial performance in Kenya. International Journal of Business and Public Management, 14(9),302-317
Nwaiwu, F. (2018). Review and comparison of conceptual frameworks on digital business transformation. Journal of Competitiveness, 7(3), 109-118.
Nwaiwu, J.N. & Joseph, B. (2021). Webometric analysis of ownership structure and firm performance of quoted deposit money banks in Nigeria. International Journal of Economics, Finance and Sustainable Development, 7(1),52-72
Nwaiwu, J.N. (2021). Asset quality and financial performance of quoted commercial banks in Nigeria. Journal of Accounting and Management Sciences, 3(1),28-35
Nwaiwu, J.N. (2022). Profit after tax: An empirical analysis. Journal of Business Research, 8(2),39-50
Nwokoro, A. I., Ironkwe, U. I., &Nwaiwu, J. N. (2023). Liquidity management and quoted deposit money banks financial performance in Nigeria. American Journal of Business Management, Economics and Banking, 16, 212-230.
Odundo, O.G. &Orwaru, M.J.(2018). Bank size and financial stability of commercial banks in Kenya. International Journal of Finance and banking Research,4(3), 40-56
Olaoye, C.O. &Alade,E.O. (2019). Effect of corporate tax and profitability of deposit money banks in Nigeria. Journal of Economics and Behavioral Studies, 11(1), 191-201
Olobo, M., Karyeija, G., Saude, P. &Khoch (2021). Credit risk management practices and performance of commercial banks in Erath Sudan. Journal of Financial Risk Management, 10(3),306-316
Ombaba, K.B(2020). Assessing the factors contributing to non-performance loans in Kenyan banks. European Journal of Business and Management, 5(32),20-33
Ombaba, K.B.(2013). Assessing the factors contributing to non-performance loans in Kenyan banks. European Journal of Business and Management, 5(32),20-33
Omodero, C.O. & Ogbonnaya, A.K. (2018). Corporate tax and profitability of deposit money banks in Nigeria. Journal of Accounting, Business and Finance Research, 3(2),47-55
Ongeri, N.B., Nyangan, A. &Nyaboga, Y. (2021). Evaluation of the effect of credit evaluation on financial performance of commercial banks in Kisii county, Kenya. International Academic Journal of Economics and Finance, 3(2),345-361
Ongore, O., & Kusa, B(2020). Determinants of financial performance of commercial banks in Kenya. International Journal of Economics and Financial Issues, 3(1),237-252
Onsongo, S. K., Muathe, M.A. & Mwangi, L.W. (2020). Financial risk and financial performance: Evidence and insights from commercial and services listed companies in Nairobi securities exchange, Kenya. International Journal of Financial Studies, 8(3),1-15
Owojori, A. A., Akintoye, I. R., &Adidu, F. A. (2011). The challenge of risk management in Nigerian banks in the post consolidation era. Journal of Accounting and Taxation, 3(2), 23-31.
Pradip, K.D.(2017). Impact of return on capital employed on company performance: An introspection in India. Saudi Journal of Business and Management Studies, 2(9),848-853
Rose, F. (2017). Working capital management and firm performance of small and large firms in Malaysia. Journal of Global Business and Social Entrepreneurship (GBSE), 3(7), 166-177.
Shafiq, K., & Nasr, O. (2015). Credit risk management: Implications on bank performance and lending growth. Saudi Journal of Business and Management Studies, 2, 584-590.
Singh, K., Misra, M., Kumar, M. & Tiwari, V. (2019). A study on the determinants of financial performance of U.S. agricultural cooperatives. Journal of Business Economics and Management, 20(4),633-647
Sufian, F. & Chong, R.R.(2019). Determinants of bank profitability in a developing economy: Empirical evidence from the Philippines, Asian Academy of Management Journal of Accounting & Finance, 4(2),546-549
Thiajarajan, S., Ayyappan, S. &Ramaachandran, A(2021). Credit risk determinants of public and private sector banks in India. European Journal of Economics, Finance and Administrative Sciences, 3(4),45-57
Ugoani, J.N. (2016). Non-performing loans portfolio and its effect on bank profitability in Nigeria.Independent Journal of Management & Production, 7(2),303-319
Zhangi, Y.(2021). Documentary letter of credit fraud risk management.Journal of Financial Crime, 19(4),343-354.
Zribi, N., &Boujelbene, Y. (2021). The factors influencing bank credit risk: The case of Temisa. Journal of Accounting and Taxation, 3(4),2-19.
Published
2023-10-25
How to Cite
ANN IJEOMA, N., UWAOMA IGNATIUS, I., & JOHNSON NKEM, N. (2023). RISK-ASSETS QUALITY AND FINANCIAL PERFORMANCE OF QUOTED DEPOSIT MONEY BANK IN NIGERIA. GPH-International Journal of Social Science and Humanities Research, 6(10), 83-104. https://doi.org/10.5281/zenodo.10041488
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