Political risk and banking sector performance in Nigeria

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Political risk is prevalent in Nigeria and tends to influence business outcomes and the stability of the banking system. As a result of this study, it was determined whether political risk matters to the performance of the banking sector in Nigeria. The effect of political risk on different banks’ performance measures, such as return on assets, return on invested capital, credit risk and stock price, were examined in a panel of 12 selected commercial banks for the period 2006–2018. Data was analyzed using a two-stage system of generalized method of moments. The results provided evidence that the effect of political risk on bank performance depends on the performance proxies. Specifically, political risk was found to be negatively related to banks’ returns on invested capital and positively related to deteriorating credit risk. Hence, it can be concluded that political risk induces poor banking system performance in Nigeria. The study provides a critical insight into the management of a country’s political systems in terms of their potential to create unfavorable conditions for banking systems to thrive.

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    • Table 1. Descriptive statistics results
    • Table 2. Pearson correlation matrix
    • Table 3. GMM regression results
    • Conceptualization
      Adefemi A. Obalade, Babatunde Lawrence
    • Data curation
      Adefemi A. Obalade, Babatunde Lawrence, Joseph Olorunfemi Akande
    • Formal Analysis
      Adefemi A. Obalade, Babatunde Lawrence, Joseph Olorunfemi Akande
    • Investigation
      Adefemi A. Obalade, Babatunde Lawrence, Joseph Olorunfemi Akande
    • Methodology
      Adefemi A. Obalade, Babatunde Lawrence, Joseph Olorunfemi Akande
    • Project administration
      Adefemi A. Obalade
    • Resources
      Adefemi A. Obalade, Babatunde Lawrence, Joseph Olorunfemi Akande
    • Software
      Adefemi A. Obalade, Babatunde Lawrence, Joseph Olorunfemi Akande
    • Supervision
      Adefemi A. Obalade
    • Validation
      Adefemi A. Obalade, Joseph Olorunfemi Akande
    • Visualization
      Adefemi A. Obalade, Babatunde Lawrence, Joseph Olorunfemi Akande
    • Writing – original draft
      Adefemi A. Obalade, Babatunde Lawrence, Joseph Olorunfemi Akande
    • Writing – review & editing
      Adefemi A. Obalade, Babatunde Lawrence, Joseph Olorunfemi Akande