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

Felicia Anyanwu (PhD); Jummai V. Madume (PhD); Samuel Dibiah

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

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.

References

Aburime, T. U. (2008). Determinants of bank performance: macroeconomic evidence from Nigeria. (Available at SSRN: hp://ssrn.com/abstract=1231064 or hp://dx.org/10.2139/ssm.1231064) Adesina, J.B, Nwidobie, B.M, and Adesina O.O (2015) Capital structure and financial performance in Nigeria.International Journal of Business and Social Research,5(2):21- 31. Akhtar, N., Bano, M., Bano, S., Zia, H. T. &Jameel, N. (2016).Capital structure impact on banking sector performance in Pakistan. International Review of Management and Business Research, 5(2): 520-532. Awunyo-Vitor, D. &Badu, J. (2012).Capital Structure and Performance of Listed Banks in Ghana. Global Journal of Human Social Science, 12(5): 57-62. Donaldson, G. (1961). Corporate debt capacity: A study of corporate debt policy and the determination of corporate debt capacity. Boston Division of Research, Harvard School of Business Administration. Granger C.W; Newbold P. (1974) Spurious regressions in econometrics. Journal of Econometrics vol. 2 Pp 111- 120. Nnanna, O.J. (2006). Macroeconomic policies in Nigeria: a review. The Tide Newspaper, Monday, Jan 9, 8. Ngerebo T. A.,& Lucky, A. L. (2016). Interest rate and deposit money banks’ performance. evidence from Nigeria 1980 – 2014. International Journal of Empirical Finance, 5 (1):22 - 35. Samuel, D. K. (2016).Effects of capital structure on financial performance of commercial banks in Kenya. A thesis submitted to the Department of Business Administration, south eastern Kenya University, Kenya. Sharma, D. &Verma, R. (2014).Impact of capital structure on the performance: An empirical analysis of Indian banking sector. International Journal of Research in Management, Economics and Commerce, 6(9): 32-39. Shiferaw, N. (2013). Capital structure and performance of commercial banks in Ethiopia. A thesis submitted to the Department of Accounting and Finance, Jimma University, Ethiopia. Zafar, M. R., Zeeshan, F. &Ahmed, R. (2016).Impact of capital structure on banking profitability. International Journal of Scientific and Research, 6(3):186-193.

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

Abstract

References

More Articles from INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT