Risk Management and Financial Performance of Banks in Nigeria

Abstract

Risk management issues in the banking sector do not only have greater impact on bank performance but also on national economic growth and general business development. The bank’s motivation for risk management comes from those risks which can lead to underperformance. This study focuses on the association of risk management practices and bank financial performance in Nigeria. Secondary data sourced was based on a 4year progressive annual reports and financial statements of 10 banks and a panel data estimation technique adopted. The result implies an inverse relationship between financial performance of banks and doubt loans, and capital asset ratio was found to be positive and significant. Similarly it suggests the higher the managed funds by banks the higher the performance. The study concludes a significant relationship between banks performance and risk management. Hence, the need for banks to practice prudent risks management in order to protect the interests of investors.

Keywords: risk management, credit risk, financial distress, reputable risk, bank performance