Effect of Risk Assets Management on the Financial Performance of Deposit Money Banks in Nigeria

Jadi M. Binawa; PhD; ACA; Umanah Kingsley M. FCA; Ibe Angela Chineanye; PhD

doi:10.56201/jafm.vol.12.no4.2026.pg14.33

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Effect of Risk Assets Management on the Financial Performance of Deposit Money Banks in Nigeria

Jadi M. Binawa, PhD, ACA, Umanah Kingsley M. FCA, Ibe Angela Chineanye, PhD

Abstract

Profits of banks are often under pressure of huge nonperforming loan portfolio and other operations in risk assets and this creates weaknesses in the financial strength of banks, and sometimes leads to distresses and collapse of such entities with negative consequences on stakeholders. This study investigates the effect of risk assets management on the financial performance of commercial banks in Nigeria, employing structural equation model to test for moderating and mediating effect. Data were collated from the audited annual report of ten (10) selected banks for 15 years to measure return on assets , return on equity , earnings per share and return on capital employed which are proxies for financial performance while TDLR, NPLR CADR DEQR and CRR were used as proxies for measuring risk assets. Panel moderated multiple regression technique using structural equation model was used in analyzing data. The first and third models were not statistically significant. While the result in the second model shows that DEQR has a positive statistical significance with financial performance while TLDR, NPLR have negative significance with financial performance. CRR and CAR did not show any significant relationship with the financial performance indicators. DEQR has a significant effect on ROCE. The calculated value for DEQR (0.0204) is less than the accepted significance value of 0.05. This means that the null hypothesis for DEQR against ROCE is rejected while the alternative hypothesis accepted. Thus, DEQR has a significant effect on the return on capital employed of listed commercial banks in Nigeria. The fourth model had positive and negative significance but individual parameters did not show any significance. The interaction of hedging (H) in the relationship between risk asset management and financial performance is also insignificant (B = 0.104, t = 0.429, p > 0.668). This implies that the null hypothesis (Ho) is accepted and the alternate rejected meaning hedging does not moderate the relationship between risk asset management and financial performance. However, the moderated result revealed that partial impact exists when there is an interaction between hedging, risk assets management, and at higher or lower hedging, risk asset management still impact financial performance. There is the need for banks to adopt stricter measures of managing risk assets using the appropriate techniques like IRB, adhere to CAMEL assessment and other models recommended by the BASEL committee on banking supervision and the central bank prudential guidelines JAFM

Keywords

Derivative assetsderivative liabilitieshedgingliquiditynonperforming loansreturn on assetsearnings per sharereturn on equity.

References

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Effect of Risk Assets Management on the Financial Performance of Deposit Money Banks in Nigeria

Abstract

Keywords

References

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