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. 1 No.8 2015

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Prudential Determinants of Stock Prices of Commercial Banks in Nigeria: an Application of Fundamentalists and Macroeconomic View. 1980 - 2014

Lucky Anyike Lucky & Henry Waleru Akani, Anyamaobi Chukwuemeka

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Abstract

This study examined the prudential determinant of stock prices of commercial banks in the Nigeria: application of the fundamentalists and macroeconomic view from 1980 – 2014. Ssecondary data were sourced from the annual financial reports of the banks, Stock Exchange factbook, and Central Bank of Nigeria (CBN) statistical Bulletin. The study used Aggregate Value of end of the year stock prices of the commercial banks as dependent variable. The micro prudential variables are Ratio of Retain Earnings, Ratio of Dividend Payout, Profitability, Commercial Banks Capital to Total Assets, Lending Rate and Bank Size while the macro prudential variables are monetary policy Rate, Inflation Rate, All Share Price Index to Gross Domestic Product, Real Gross Domestic Product, Exchange Rate and Broad Money Supply. The Ordinary Least Square Method of Co-integration test, Augmented Dickey Fuller Unit Root Test, Granger Causality test and Vector Error Correction Model was used to examine the nature of relationship that exist between the dependent and the independent variables in the regression models. The study found that all the micro prudential variables have positive effects on the stock prices of the commercial banks except lending rate. The model summary shows a strong relationship between the dependent and the independent variables with an R2 69.4% explained variation, 12.43051 overall significant and the probability of 0.000004, from the micro prudential variables while the macro prudential variables revealed an R2 of 52.0% explained variation, 8.788310 over significant and probability of 0.000004, this proved that the micro prudential variables have positive and significant relationship while macro prudential variables exhibits positive average and significant relationship with stock prices in Nigeria. The findings validate fundamentalist and macroeconomic view. Therefore, we recommend that management of the commercial banks should strengthen its management c

keywords:

Micro and Macro Prudential, Stock Prices, Commercial Banks, Fundamentalists, macroeconomic view

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