Published November 30, 2025 | Version CC-BY-NC-ND 4.0
Journal article Open

Effects of Debt Finance on Financial Performance of Listed Deposit Money Banks in Nigeria

Authors/Creators

  • 1. Department of Accounting, Faculty of Management Sciences, Federal University Dutsinma, Katsina State, Nigeria.

Contributors

Contact person:

  • 1. Department of Accounting Education, School of Secondary Education (Business), Federal College of Education (Technical), Bichi, Kano State, Nigeria.
  • 2. Department of Accounting, Faculty of Management Sciences, Federal University Dutsinma, Katsina State, Nigeria.

Description

Abstract: This study was inspired by the persistent poor performance of Nigerian Deposit Money Institutions, which in turn affects the return on investment available to capital providers. It concentrated on debt financing and return on investment for businesses that transfer money from economic sectors with surpluses to those with deficits. The study examines how both total debt-to-total assets and long-term debt-to-total assets influence the return on assets of Nigerian listed deposit money banks. The audited financial accounts of eleven (11) of the fourteen (14) DMBs that make up the study population over ten years (2014– 2023) served as the secondary data for the study. The Trade-Off Theory serves as the foundation for the study, which used a correlational research approach. The panel data used in the study were analysed using STATA 14, and several regression models were applied. The results from the Random Effect Regression model for the 110 observations were examined. The results showed that whereas long-term debt to total assets (LTDTA) has a considerable and positive impact on ROA, total debt to total assets (TDTA) has an adverse but significant effect. The study's findings showed that debt financing has a 26% impact on the ROA of listed DMBs in Nigeria, with long-term debt accounting for the remaining 74%. The study recommends that DMBs should use debt more prudently to prevent debt traps that could jeopardise their ability to continue operating in the event of default.

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Additional details

Identifiers

DOI
10.54105/ijef.B2628.05021125
EISSN
2582-9378

Dates

Accepted
2025-11-15
Manuscript received on 16 June 2025 | First Revised Manuscript received on 28 July 2025 | Second Revised Manuscript received on 22 October 2025 | Manuscript Accepted on 15 November 2025 | Manuscript published on 30 November 2025.

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