IIARD International Institute of Academic Research and Development

Journal of Accounting and Financial Management (JAFM )

E-ISSN 2504-8856
P-ISSN 2695-2211
VOL. 10 NO. 9 2024
DOI: 10.56201/jafm.v10.no9.2024.pg259.272

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Effect of Financial Leverage on the Performance of Nigerian Deposit Money Banks

Aza, Ibrahim Eyigege (PhD)

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Abstract

This study examines the effect of financial leverage on the performance of Nigerian deposit money banks . The study utilizes an ex-post facto research design using panel data regression model covering the study period of ten years spanning from 2013 to 2022. Population of the study is the 22 deposit money banks listed on the Nigeria stock exchange from which a sample of 7 were drawn using purposive sampling technique. The dependent variable of the study is the performance of deposit money banks which is measured by ROA and ROE while the independent variable is the financial leverage measured by debt to asset, debt to equity with a control variable as equity to asset. The finding of the study revealed that debt to asset and equity to asset have significant effect on the ROA while debt to equity has no significant effect on the ROA. The finding further indicated that debt to asset has significant effect on the ROE while debt to equity and equity to asset have no significant effect on the ROE. The finding therefore concludes that debt to asset and equity to asset are the major determinants of financial performance of the Deposit Money Banks. The study recommends therefore that Banks should utilize both debt with minimal cost of capital and equity as major sources of financing their operations.

keywords:

Equity trading, performance, design, population, purposive

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