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. 10 NO. 7 2024
DOI: 10.56201/ijbfr.v10.no7.2024.pg17.30

---

Determinants of Financial Performance of Deposit Money Banks Listed on the Nigeria Stock Exchange

Aza, Ibrahim Eyigege

---

Abstract

Finding the key factors influencing the financial performance (FP) of deposit money banks (DMBs) listed on the Nigerian Stock Exchange (NSE) is essential for maintaining financial stability and withstanding unfavorable shocks. The current study looks on the factors that affect DMBs that are listed on the NSE's FP. The study uses a descriptive design to examine the impact of bank size, credit growth, financial leverage, and dividend payout on the profitability and liquidity of DMBs listed on the NSE. It does this by using a cross-sectional pooled OLS panel data set that spans 10 years (2013 to 2022). Yemane's sampling strategy is used to choose five DMBs from the total population of 21. Regression analysis with fixed effects, random effects, and panel data OLS regression are used in this work. The conclusion shows that the FP of DMBs listed on the NSE is highly impacted positively by bank size and credit growth, significantly negatively by financial leverage, and marginally positively by dividend payout. Consequently, the study suggests that DMB in Nigeria, rather than depending solely on financial leverage and dividend payments, should develop comprehensive and realistic financial plans to improve FP and mobilize more deposits to strengthen their lending capability. Retaining earnings will allow for future growth and expansion.

keywords:

dividend payout, Bank size, financial leverage, profitability, liquidity.

---

References:

Abondo, O.C. (2013) “The effect of size on the financial performance of deposit taking
microfinance institutions and commercial banks in Kenya. A research project submitted
in partial fulfillment of Masters of Business Administration, School of Business,
University of Nairobi.
Aliyu, M. and Yusuf, H. (2014) “Impact of bank lending on economic growth in Nigeria.
Research Journal of finance and accounting. ISSN 2222-1697 (paper) 2222-2847 (online)
vol. 5, No.18, 2014.
Amahalu, N. and Abiahu, M.F.C. (2017) “Loan management and financial performance of
quoted deposit money banks in Nigeria.” The 2017 International Conference on African
Entrepreneurship and Innovation for sustainable development.
Charles et al (2014) “effects of dividend policy on firm’s financial performance: Econometric
analysis of listed manufacturing firms in Kenya. Research Journal of Finance and
Accounting. ISSN 2222-1697 (paper) ISSN 2222-2847 (Online) vol.5, N0.12, 2014.
Dogan, M. (2013) “Does firm size affect the firm profitability? Evidence from Turkey. Research
Journal of Finance and Accounting. ISSN 2222-1697 (paper) ISSN 2222-2947 (online)
Vol.4,No.4,2013.
Joe, P. and Rosengren, E.S. (N.Y.) “Bank lending and the transmission of monetary policy.
Karethio E.N. (2013) “The effect of dividend payout ratio on financial performance of
companies listed at the Nairobi securiries exchange.” A research project submitted in
partial fulfillment of the requirement for the award of the degree of masters of business
administration, school of business, university of Nairobi.
Maja, P. and Josipa, V. (2012) “Influence of firm size on its business success. Croation
Operational Research Review (CRORR), Vol. 3, 2012.
Mohammed, A.B.M. (2015) “The determinants of Bank Liquidity: Case of Tunisia. International
Journal of Economics and Financial Issues. Vol.5, No.1 2015, pp.249-259. ISSN: 2146-
4138.
Ndirangu P.W. (2014) “The effect of dividend policy on future financial performance of firms
listed at the Nairobi securities exchange”. A research project submitted in partial
fulfillment of the requirement for the award of the degree of masters of business
administration, school of business, university of Nairobi.
Ngumo et, al. (2017) “Determinants of financial performance of microfinance banks in Kenya.
Research Journal of Finance and Accounting. ISSN 2222-1697 (paper) ISSN 2222-2847
(online) Vol.8, No. 16, 2017.
Njeri, M.A. (2016) “Effect of lending practices on financial performance of commercial banks in
Kenya: A survey of selected banks within Nairobi. A research project report submitted to
Chandaria school of business in partial fulfillment of the requirement for the degree of
masters of business administration (MBA). United States International University-
Africa.
Nwanna, et, al (2017) “Effect of financial leverage on firm’s performance: A study of Nigerian
Banks (2006-2015).
Nzioka, P.K. (2013) “The relationship between firm size and financial performance of
Commercial banks in Kenya. A research project submitted in partial fulfillment of the
requirement for the degree of Masters of Business Administration, University of Nairobi.
Olawale, et, al. (2017) “The effect of firm size on performance of firms in Nigeria.
AESTIMATIO, The IEB International Journal of finance, 2017. 15:2-21.
Olokoyo, F.O. (2011) “Determinants of commercial bank’s Lending Behaviour in Nigeria.
International Journal of Financial Research. Vol.2, No2; July 2011.
Olusanya, et,al “Determinants of lending behavior of commercial banks: Evidence from Nigeria,
A co-integration Analysis (1975-2010). IOSR Journal of humanities and social science
(JHSS). ISSN: 2279-0837, ISBN: 2279-0845. Volume 5, issue 5 (Nov-Dec. 2012).pp 71-
80.
Ong’era, J.O. and Onditi, L.A. (2016) “Influence of loan lending policies on financial
performance of commercial banks in Kenya. International Journal of Economics,
Commerce and Management. Vol.iv, Issue 11, November 2016. ISSN 2348-0386. United
Kindom.
Osuka, B.O. and Richard, O.C. (2013) “The determinants of financial performance of quoted
banks in Nigeria: A study of selected deposit money banks (DMBs) (2001-2010).
International Journal of Education and Research. Vol.1 No.10 october 2013
Thaddeus, E.O. (2012) “Analysis of effect of financing leverage on bank performance: Evidence
from Nigeria. Journal of Public Administration and Governance. ISSN 2161-7104 2012,
VOL.2 No.4.
Thomas L.S. (2012) the relationship between market capitalization and profitability of
Commercial banks listed on the Nairobi stock exchange. A research project submitted in
Partial fulfillment of the requirement for the award of Master of Business Administration
(MBA) School of business, university of Nairobi.
Usman, M.M. (2017) “Effect of lending on financial performance of quoted deposit money
Banks in Nigeria. A seminar paper presented in partial fulfillment of the requirements for
the award of the doctor of philosophy (PhD) degree in accounting and finance.
Victor, O. and Eze, O.R. (2013) “Effect of bank lending rate on the performance of Nigerian
deposit money banks. International Journal of Business and Management Review. Vol.1,
No.1, March 2013, pp.34-43.

DOWNLOAD PDF

---

Back