An Assessment of the Effect of Risk Management Committee on The Financial Performance of Deposit Money Banks

Pheekwalah Yayirus       Mohammed Usman

doi:10.56201/ijebm.vol.11.no3.2025.pg232.245

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An Assessment of the Effect of Risk Management Committee on The Financial Performance of Deposit Money Banks

Pheekwalah Yayirus Mohammed Usman

Abstract

This study seeks to investigate the effect of Risk Management Committee (RMC) on the financial performance of Deposit Money Banks (DMBs) in Nigeria. Financial performance is judged to be a critical aspect of any organization and thus plays a pivotal role in determining the success and sustainability of such organizations. The study spanned from 2012 to 2022. Data for the study was sourced from secondary source through the financial statements and annual reports of the 7 selected publicly listed DMBs in Nigeria. Correlation/OLS regression analysis techniques were employed in analyzing the data so as to measure the relationship between the variables and effect of RMC indicated by its size, independence and meetings on financial performance of DMBs indicated by ROA and ROE. Findings revealed that RMC size has significant effect on financial performance of DMBs with a mean value of 0.0172 and p – value of 0.021. Furthermore, RMC independence and meetings with the mean value of -0.0049 and -0.0063 respectively were found to affect financial performance of DMBs negatively and insignificantly. The study recommends increasing number of women in the RMC and regular hosting of meetings to fulfil company’s objectives and improve its financial performance. Additionally, practitioners and policy formulators need to pay specific attention to RMC size, frequency of meetings and independent boards as a concern in building robust risk management committee. Introduction The success and sustainability of an organization are largely determined by its financial performance, which is a crucial component of every organization. Maintaining a solid financial performance is essential for the long-term survival and general economic stability of deposit money banks, which are the key financial intermediaries in Nigeria. Improving financial performance is the main objective of any profit-making firm. How well a business is doing in the marketpl

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(McKinsey & Company, 2021). The EUT is a fundamental concept in economics and decision theory that provides a framework for understanding individual preferences and decision-making under uncertainty. It has significant implications for risk management, as it helps individuals and organizations evaluate and make decisions in situations where the outcomes are uncertain and involve risks (Damanpour & Aravind, 2021). It assumes that individuals are rational and have consistent preferences over outcomes. The use of Expected Utility Theory in risk management extends beyond simple investment decisions and can be applied to various domains, such as insurance, banking sector, loan facilities, portfolio management, and project evaluation. It is imperative to note that EUT has been subject to criticism and limitations. One major critique is that individuals often deviate heteroscedasticity test is consequently supported by this result. The study uses spearman correlation for correlation matrix. Hausman Test The Hausman Test can be used to determine whether Fixed Effects Model or Random Effects Model is more appropriate. To apply this test, the study estimated both the Fixed Effects and Random Effects Models and compare the estimated coefficients using Hausman statistic. The decision rule is to use Fixed Effects if the p-value is significant, if not use Random Effect. The result in Table 5 revealed a p-value of 0.6193. Therefore, the Hausman test suggest the use of Random Ef

An Assessment of the Effect of Risk Management Committee on The Financial Performance of Deposit Money Banks

Abstract

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