EFFECT OF CAPITAL ADEQUACY ON THE PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

Abstract: The study reviews the effect of capital adequacy on the performance of Nigerian deposit money banks for the period of 2000 – 2020. The objective of this study is to examine how capital adequacy has helped deposit money banks achieve an efficient performance. This study adopts an ex-post facto research design, and the sample size is all deposit money banks with international and national authorization in Nigeria. The data used are mainly secondary data collected from the audited annual publications financial statements of all the deposit money banks listed on the Nigerian Stock Exchange. The study employed ordinary least square multiple regression (OLS), descriptive statistical analysis, in addition to E-view electronic packages. According to empirical results at 5% level of significance, findings show that total capital to risk weighted assets, banks capitalization to total credits, and debt to equity ratio (the independent variables to capital adequacy) had direct and inverse linear significant effect on return on assets (dependent variable to performance) of deposit money banks in Nigeria. The study concludes that capital adequacy, one of the key factors affecting the performance of the Nigeria deposit money banks in measuring efficient performance of financial institutions in Nigeria has both direct and inverse linear relationship with efficient performance of banks, therefore, recommends that the Central Bank of Nigeria should effectively regulate the capital and the resources owned by the deposit money banks (DMBs) in Nigeria to globally acceptable standard since the current ₦25 billion and ₦50 billion minimum capital-base requirements cannot justify the banking reality of nowadays. This will help to enhance investment planning, decision making within the financial system and early prevention of systemic bank distress.

Keywords: Asset Quality, Capital Adequacy, corporate governance, Distress, Liquidity, Profitability.

Title: EFFECT OF CAPITAL ADEQUACY ON THE PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

Author:  Ezu, Gideon Kasie, Nwanna Ifeanyi Onyenwe, Eke-Jeff, Oluchi Mirian

International Journal of Novel Research in Marketing Management and Economics

ISSN 2394-7322

Vol. 10, Issue 1, January 2023 - April 2023

Page No: 53-63

Novelty Journals

Website: www.noveltyjournals.com

Published Date: 27-March-2023

DOI: https://doi.org/10.5281/zenodo.7774547

Paper Download Link (Source)

https://www.noveltyjournals.com/upload/paper/EFFECT%20OF%20CAPITAL%20ADEQUACY-27032023-7.pdf