Credit risk management and financial sustainability of listed deposit money banks in Nigeria

Credit risk management and financial sustainability of listed deposit money banks in Nigeria

Author by Dr. Tunji Siyanbola

Journal/Publisher: Journal Of Research In Business And Management

Volume/Edition: 9

Language: English

Pages: 64 - 77

Abstract

Financial sustainability is generally believed to be the consistent key indicator of how a company is being
managed presently and looking at enhanced performance in the future. However, the quality of risk assets and
its management can change the entire performance of the company and consequently; its financial
sustainability. This study examined the effect of credit risk management on the financial sustainability of listed
deposit money banks in Nigeria. The study adopted an Ex-post facto research design. The population consisted
of all 14 listed Deposit Money Banks (DMBs) in Nigeria as at December 31, 2019 out of which a sample of 12
banks were purposively selected based mainly on availability of complete data for ten years period (2010 –
2019). Secondary data extracted from the financial statements were analyzed using descriptive and inferential
analyses. The population of 14 banks accounted for 53.85% of banks in operation. The study found that credit
risk management (CRM) proxied by Loan Deposit Ratio (LDR), Non-performing Loan (NPL) and Assets Growth
Percentage (AGP) had a positive significant effect on CAR of listed DMBs in Nigeria (Adj. R2 = 0.0969, F (3,105)
= 13.66; P < 0> DMBs in Nigeria (?Adj. R2 = 0.0814, ?F (3,116) = 12.19; P < 0> ROCE of listed DMBs in Nigeria (Ad R2 = 0.1873, F (3,105) = 2.73; P > 0.05). BS significantly modified the
relationship between the CRM and ROCE positively (?Adj. R2 = 0.1779, ?F (3,116) = 22.88; P < 0> CRM positively and significantly affected the financial sustainability of listed DMBs in Nigeria. The study
concluded that credit risk management has a positive significant effect on financial sustainability of listed
DMBs in Nigeria. This study recommended that regulators should adopt a risk based approach in determining
capital adequacy requirements and give special attention to banks that are too big to fail while DMBs’
managements should ensure that all the board members and executive managements amongst other
stakeholders are trained to appreciate the functions and responsibilities of credit risk managemen


Other Co-Authors