EFFECT OF RISK ON FINANCIAL PERFORMANCE OF LISTED COMMERCIAL BANK IN NIGERIA
Keywords:
Capital Adequacy Ratio, Custom And Financial Performance, Loan Loss Ratio, Non-Performing Loan RatioAbstract
The study investigated the effect of risk on financial performance of quoted commercial bank in Nigeria. The study sheds light on the surprising link between risk and financial performance of quoted commercial bank in Nigeria. The study covered a ten-year period from 2014 to 2023. The specific objective was to analyze the impact of non-performing loan (NPL) ratio, Loan loss ratio, Capital adequacy ratio (LCR) and custom on financial performance of listed commercial bank in Nigeria. The study employed Ex-post facto research design in which secondary data were collected from annual reports and financial statements of five purposively listed commercial banks from 2014 to 2023. Panel least square regression was adopted for the analysis using E-views 10 statistical tools. Findings made indicates that non-performing loan ratio has a significant positive impact on the financial performance (p-value = 0.0000), loan loss ratio has a significant positive impact on financial performance. (p-value = 0.0000), capital adequacy ratio has a significant negative impact on financial performance (p-value = 0.0000) and custom has insignificant negative impact on the financial performance of quoted commercial bank in Nigeria. (p-value =0.6030). The study recommended among others that banks should implement stringent policies and strategies to reduce non-performing loans. This will help lower the NPL ratio and improve financial performance as higher NPLs were found to positively impact performance, suggesting recovery efforts may be yielding results. Strict loan monitoring and borrower evaluation can help curb rising NPLs.
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