Impact of Liquidity Risk and Leverage on the Financial Performance of Nigerian Deposit Money Banks

Journal Title: Journal of Economics, Finance and Management Studies - Year 2024, Vol 7, Issue 08

Abstract

This study investigates the impact of liquidity risk and leverage on the financial performance of listed Deposit Money Banks (DMBs) in Nigeria. The study utilized a census approach to gather data from all 15 listed DMBs on the Nigerian Exchange Group as of December 31, 2022. The study spanned from 2013 to 2022, employing various statistical analyses including descriptive analysis, correlation analysis, skewness and kurtosis tests for normality, multiple regression models for fixed-effects and random-effects models, and the Hausman test to ensure robust findings. The results indicated that liquidity risk exhibited a positive and significant impact on return on equity (ROE), a measure of financial performance, with a coefficient of 0.132 and a p-value of 0.000, suggesting that effective management of liquidity risk enhances profitability. Conversely, leverage was found to have a significant negative impact on ROE, with a coefficient of -1.351 and a p-value of 0.007, highlighting that higher debt levels substantially reduce profitability. In conclusion, the study suggests that while liquidity risk can be effectively managed to enhance profitability, excessive leverage poses significant threats to financial performance. The findings underscore the importance of robust risk management strategies for improving the financial performance of listed DMBs in Nigeria. These insights are crucial for policymakers, banking executives, and investors seeking to enhance the stability and performance of the banking sector.

Authors and Affiliations

Olateju Dolapo AREGBESOLA , Olatunde WRIGHT , IfeOluwa Tomiwa KOLAWOLE , Sunday Olusola OMOJOLA

Keywords

Related Articles

The Influence of Organizational Culture, Job Satisfaction, and Servant Leadership on Service Quality Mediated by Affective Commitment in Freight Forwarding Companies

The purpose of this research is to analyze empirically effect of organizational culture, job satisfaction, and servant leadership on service quality through the affective commitment of employee from freight forwarding co...

Effect of bootstrapping dimensions on performance of selected Small and Medium Scale Enterprises (SMEs) in South-West, Nigeria

The overall problems faced by the SMEs are similar in different jurisdictions, there are significant differences in their priorities and needs in different countries. One of the most challenging factors that have hindere...

The Indigenous People’s Innovation Copyright and Legal Consequences: A case study of the plant chopper machine in Mulia Asih Farmer Group, Central Kalimantan, Indonesia

Agrotourism is a tourism activity that combines plantation or agricultural activities by offering unique experiences to visitors. Indonesia, which has natural resources in the plantation and agricultural sectors, provide...

An Analysis of Contributory Factors to Low Own Sources Revenue (OSR) in Local Authorities in Zambia: A Case Study of Muchinga Province

The study aimed at analysing contributory factors to Low Own Sources Revenue (OSR) in Local Authorities (LAs) in Zambia case studying Muchinga Province. The study was guided by three objectives which were: to review the...

Work-Family Conflict and Work-Life Balance as a Predictor of Employee Performance in the Manufacturing Industry

This study examines the relationships between work-family conflict and work-life balance with job satisfaction and employee performance, highlighting the mediating role of job satisfaction. The population of this study w...

Download PDF file
  • EP ID EP741940
  • DOI 10.47191/jefms/v7-i8-10
  • Views 94
  • Downloads 0

How To Cite

Olateju Dolapo AREGBESOLA, Olatunde WRIGHT, IfeOluwa Tomiwa KOLAWOLE, Sunday Olusola OMOJOLA (2024). Impact of Liquidity Risk and Leverage on the Financial Performance of Nigerian Deposit Money Banks. Journal of Economics, Finance and Management Studies, 7(08), -. https://europub.co.uk/articles/-A-741940