Financial Risk, Capital Adequacy and Liquidity Performance of Deposit Money Banks in Nigeria

Odinaka Frank, Igbojindu and Gloria Ogochukwu, Okafor and Chinedu Jonathan, Ndubuisi (2024) Financial Risk, Capital Adequacy and Liquidity Performance of Deposit Money Banks in Nigeria. International Journal of Trend in Scientific Research and Development, 8 (1). pp. 175-186. ISSN 2456-6470

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Abstract

The objective of this study was to examine the effect of financial risk on liquidity performance of Deposit Money Banks (DMBs) in Nigeria, with capital adequacy as a moderator. The study specifically examined the mediating role of capital adequacy on the effect of operational risk, market risk and credit risk on liquidity performance. The study adopted the ex-post facto research design; as the goal was not to manipulate any variable but rather to establish effect and mediation. The population comprised listed Deposit Money Banks and the sample restricted to a purposive sample of ten (10) banks whose annual reports were accessible for the period of 13 years from 2010-2022 which was the time scope of this study. The data were analysed using structural equation model. The study found that capital adequacy does not significantly mediate the effect of operational, market and credit risks on liquidity performance. Based on these findings, the study recommended that: Banks need to create a capital adequacy mechanism necessary for hedging against operating risks inherent in the financial market; Banks need to develop a capital adequacy framework to guide them to optimally disclose their market risks, enhance the quality of their disclosure practices, improve the quality of their financial reports and more efficiently manage their liquidity; The Nigerian Central Bank need to develop a statutory requirement that will demand a certain level of capital adequacy by the banks before granting a certain level of credit.

Item Type:	Article
Subjects:	H Social Sciences > HJ Public Finance
Divisions:	Postgraduate > Master's of Islamic Education
Depositing User:	Journal Editor
Date Deposited:	22 Mar 2024 09:45
Last Modified:	22 Mar 2024 09:45
URI:	http://eprints.umsida.ac.id/id/eprint/13547

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