IIARD International Institute of Academic Research and Development

IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH (IJBFR )

E-ISSN 2695-1886
P-ISSN 2672-4979
VOL. 4 NO. 1 2018

---

Financial Risk and Financial Flexibility: Evidence from Deposit Money Banks in Nigeria.

Kola Adegoke & Yusuf Olatunji, Oyedeko

---

Abstract

The study examines effect of financial risk on financial flexibility of Deposit Money Banks. Expos-facto research design was used for the study. This study used secondary data, sourced from the data were extracted from the audited financial reports of the banks within the period of the study for the period of ten years spanning from 2007 to 2016. The data was analysed using panel data regression analysis. The study found that funding liquidity risk has positive but insignificant effect on financial flexibility while solvency risk has negative significant effect on financial flexibility. The study concluded that financial flexibility can be determined by the both liquidity and solvency risk facing the banks, which in turn reflects their current capital levels in meeting their financial obligation. In line with the conclusion, the study recommends that management of Deposit Money Banks should strive towards expanding the customers’ base in order to deposits frequency through provision of enhanced financial services and this will enhance daily capital level in meeting their obligation

---

References:

Abate, S., (2014). The impact of Corporate Governance mechanisms on Risk: Evidence from
Commercial banks in Ethiopia. Journal of Banking & Financial Research, 1(2), 1-21.

Adesina, J., B., Nwidobie, B., M., & Adesina, O. O. (2015). Capital Structure and Financial
Performance in Nigeria. International Journal of Business & Social Research, 05(02),
21–31.

Adrian, R. (2014). The Relationship between Financial Risk and Financial Performance
insurance companies in Kenya. Unpublished Master’s Thesis. University of Nairobi.

Ahmed, N., Ahmed, Z., & Naqvi, I. (2011). Liquidity Risk and Islamic Banks: Evidence from
Pakistan. Interdisciplinary Journal of Research in Business, 1(9), 99-102.

Akhtar, M., Ali, K., & Sadaqat, S. (2011). Liquidity Risk Management: A comparative study
between Conventional and Islamic Banks of Pakistan. Interdisciplinary Journal of
Research in Business, 1(1), 35-44.

Almeida, H., Campello, M., & Weisbach, M.S., (2011). Corporate financial and investment
policies when future financing is not frictionless. J. Corp. Finance, 17, p. 675–693.

Arif, A. & Showket, A. (2015). Relationship between Financial Risk and Financial
Performance: An Insight of Indian Insurance Industry. International Journal of
Science & Research, 4(11), 1424-1433.

Barges, A. (1963). The effect of capital structure on the cost of capital: a test and evaluation
of the Modigliani and Miller propositions. Englewood Cliffs, NJ, Prentice-Hall.

Brooks, C (2008). Introductory Econometrics for Finance. Cambridge University Press.

Buchory, H. A.,(2015) Banking Profitability: How does the Credit Risk and Operational
Efficiency Effect? Indonesia Journal of Business & Management Sciences, 3(4),
118-123

DeAngelo, H., & DeAngelo, L., (2007). Capital structure, payout policy, and financial
flexibility, Working Paper, University of Southern California.

Eneyew, L. (2013). Financial Risks and Profitability of Commercial Banks in Ethiopia.
Unpublished Master’s Thesis. Addis Ababa University.

Guay, W., & Harford, J., (2000) The cash-flow permanence and information content of
dividend increases versus repurchases. Journal of Financial Economics, 57, 385-415

Hooshyar, A., M., Mohammadi, M, F., & Valizadeh, A., S., (2017) factors affecting financial
flexibility based on panel data in firms listed in Tehran Stock Exchange. Journal of
Economics & Finance, 8(1),109-114.

Holton, G. (2004). Defining Risk. Financial Analysts Journal, 60(6), 19-25.
Imbierowicz, B., Rauch, Ch. (2014). The relationship between liquidity risk and credit risk in
Banks. Journal of Banking & Finance, 40(1), 242-256.

Iqbal, A. (2012). Liquidity Risk Management: A Comparative Study between Conventional
and Islamic Banks of Pakistan. Global Journal of Management & Business Research,
12(5), 54-64.

Khan, M. N., Naeem, M. U., Rizwan, M. & Salman, M. (2016),Factors Affecting the Firm
Dividend Policy: An Empirical Evidence from Textile Sector of Pakistan.
International Journal of Advanced Scientific Research & Management, Vol. 1(5).

Lartey, V., C., Antwi, S.,& Boadi, E., K., (2013) The Relationship between Liquidity and
Profitability of Listed Banks in Ghana. International Journal of Business & Social
Science 4(3).

Mutua, J. M. (2015) Effect of Mitigating Credit Risk on Performance of Commercial Banks
in Kenya: a case of Chuka town European Journal of Business & Social Sciences,
4, (07), 113 – 125

Nance, D., R., Smith, C., W., & Smithson, C., W., (1993) Determinants of Corporate
Hedging. Journal of finance, 48(1), 267-284.

Olusanmi O. , Uwuigbe U.,& Uwuigbe O., R.,(2015). The Effect of Risk Management on
Bank’s Financial Performance in Nigeria. Journal of Accounting & Auditing:
Research & Practice, 20(15)

Sensarma, R., & Jayadev, M., ( 2009)Are bank stock sensitive to risk management? The
Journal of Risk Finance, 10, 7-22.

Sisay, D., (2017). The effect of financial risk on performance of insurance companies in Ethiopia. A thesis submitted to Addis Ababa University College of Business
and Economics, Department of Accounting and Finance in partial fulfillment of
the requirements for degree of masters of science in accounting and finance.

DOWNLOAD PDF

---

Back