IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 3 NO. 3 2018

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Effects of Total Short Term Debts to Total Assets on Net Operating Income of Deposit Money Banks in Nigeria

Felicia Anyanwu (PhD) AND Jummai V. Madume (PhD) & Samuel Dibiah

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Abstract

The aim of this paper is to investigate the effects of Total Short Term Debts to Total Assets on Net Operating Income of Deposit Money Banks in Nigeria using the pooled Ordinary Least Square(OLS) technique.We used a balanced panel data, consisting of seven deposit money banks for ten quarters giving us seventy observations from 2015:Q1 to 2017:Q2 from the Securities and Exchange Commission. The results reveal that a positive relationship exist between net operating income and short term debts of deposit money banks for the period under review implying that an increase in the ratio of short-term debt to total asset would increase operating income. This implies further that continuous accumulation of debts as option to finance the firm will reduce average Returns on Assets drastically. The study therefore concludes that Deposit money banks should fund their operations largely from other external source of finance such as bond markets to ensure diversification instead of relying heavily on the short term deposits of customers and recommends that deposit money banks should strive to maintain a healthy debt/asset ratio so as to stay liquid to enable them meet up with their short term obligations.

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