Risk management and performance of deposit money banks in Nigeria: A re-examination


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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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    • 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
    • Conceptualization
      Babatunde Moses Ololade
    • Investigation
      Babatunde Moses Ololade, Olaide Olufolayemi Olatunji
    • Methodology
      Babatunde Moses Ololade, Olaide Olufolayemi Olatunji
    • Writing – original draft
      Babatunde Moses Ololade, Rafiu Oyesola Salawu , Olaide Olufolayemi Olatunji
    • Writing – review & editing
      Babatunde Moses Ololade
    • Data curation
      Rafiu Oyesola Salawu
    • Formal Analysis
      Rafiu Oyesola Salawu
    • Supervision
      Rafiu Oyesola Salawu
    • Validation
      Rafiu Oyesola Salawu
    • Resources
      Olaide Olufolayemi Olatunji
    • Software
      Olaide Olufolayemi Olatunji