FINANCIAL SOUNDNESS INDICATORS AND PERFORMANCE OF LISTED DEPOSITS MONEY BANKS IN NIGERIA
Keywords:
Capital adequacy ratio, Financial soundness indicators, Liquid asset ratio, Non-performing loans, PerformanceAbstract
The study examines the relationship between financial soundness indicators and performance of deposits money banks in Nigeria. The specific objectives of the study are to ascertain the relationship between: non-performing loans and performance of deposits money banks; liquid assets ratio and performance of deposits money banks; and capital adequacy ratio and performance of deposits money banks in Nigeria. Eight (8) deposits money banks were selected from the Nigerian Stock Exchange (NSE). The secondary data used were sourced from the selected bank’s annual report and Nigerian Stock Exchange fact book over the period of 10years (from 2009 to 2018). The data collected were analysed using Pearson correlation matrix. Additional test were conducted using the regression of ordinary least square method. The results show that the coefficient of Liquid asset ratio and Capital adequacy ratio are positive indicating that they positively influence bank’s performance (ROA & ROE) during the period studied. However, Non-performing loan is detrimental to the bank’s performance since it has negative coefficient. Based on the findings, the study concludes that financial soundness indicators of banks affect and increase their performance. Although, most banks could not grow or perform as expected due to high rate of non-performing loan, but an upsurge in the percentage of capital adequacy ratio has the influence of increasing the proportion of banks performance; and with the higher liquidity, banks can also meet up with the expected and unexpected demands for cash.
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