A Time Series Analysis of the Effect of Bank Fraud on the Performance of Deposit Money Banks (DMB) in Nigeria

Abstract

The main motivation of this study stemmed from the researchers' quest to establish statistically whether the number of fraud cases, actual losses incurred, and the number of ATM frauds that occurred in banks could provide empirical proof as appropriate determinants of bank fraud and also ascertain the extent of influence these variables exerted on the performance of deposit money banks (DMB) in Nigeria. As such, this study ascertained the effect of bank fraud on the performance of deposit money banks (DMB) in Nigeria. Specifically, the study determined the effect of fraud cases, actual loss associated with fraud, and ATM frauds on the return on assets of banks in Nigeria. The study adopted an ex–post facto research design approach, using panel data from the cross-section of three banks for the period of five (5) years from 2017 – 2021, First Bank of Nigeria Plc, Zenith Bank Plc, and United Bank of Africa (UBA) Plc were purposively chosen as the sample size. Secondary data were carefully obtained which included the CBN Statistical Bulletin (2022), CBN and NDIC annual reports from 2017 – 2021, and from which the data were obtained. The data collected were presented and analyzed using tables, descriptive statistics, unit root tests, and inferential statistics. A panel least square Regression analysis was used to test for the statistical significance of the effect of bank fraud on the performance of deposit money banks (DMB) in Nigeria. The results showed that Fraud cases do not significantly affect the return on assets of banks in Nigeria. The findings further revealed that Actual losses associated with fraud do not significantly affect the return on assets of banks in Nigeria. Finally, the result established also that ATM frauds do not significantly affect the return on assets of banks in Nigeria. Consequent upon the findings, this study recommended among others; that organizations should endeavor to put in place a strong internal control system to limit and reduce the amount usually involved in fraud cases. Again, strict disciplinary action should be taken against fraudulent staff to serve as a deterrent for others.

Keywords: Fraud cases, actual losses incurred. ATM frauds, return on assets, deposit money banks.