Cash Management and its Effect on Financial Performance of Deposit Money Banks in Nigeria

Abstract

This study examined cash management (CA) and its effect on financial performance (FP) of deposit money banks (DMBs) in Nigeria from the period of 2013 to 2022 (10years). CA proxied with Cash flows from operating activities to total assets (CFOATA), Cash flows from investing activities to total assets (CFIATA), Cash flows from financing activities to total assets (CFFATA), Year ended cash balance to total assets (YECBTA) and Bank Size (BSZ) (independent variables) and FP [proxied with Return on Assets (ROA)]. The Ex-Post Facto research design was used. Data on CA and FP were obtained from the annual reports and accounts of ten (10) DMBs listed in Nigeria Exchange Group that has international presence. The data set was described using descriptive statistics, followed by the correlation analysis was used to ascertain the co-movement of the independent variables in relation to the dependent variable and several diagnostics tests. Since the data are panel series that the unit root test was conducted to ascertain if the data are stationary in order to have accurate regression result followed by single equation co-integration test while the Multiple Regression analysis were employed with the aid of E-VIEW version 9.0. In the light of the findings, it evident that measures of CA used has mixed effects on ROA of DMBs in Nigeria. However, majority of the independent variables such CFFATA, YECBTA and BSZ has significant effects on ROA of DMBs while CFOATA and CFIATA established an insignificant effects on ROA of DMBs in Nigeria. Hence, the study concluded that a CA has significant effects on FP of DMBs in Nigeria. The study recommends that financial regulators should organize conferences and symposia for DMBs in order to enhance their knowledge base on the effective use of CA in the bids to enhanced bank performance.

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