The Effects of Financial Decisions on the Performance of Commercial Banks in Nigeria

Abstract

The main purpose of this study is to determine the effect of financial decisions on the performance of commercial banks in Nigeria using four performance indices. Both primary and secondary data were used. 20 commercial banks that operated during 2000-2013 period constitute the sampling frame. In analysing the data, Panel regression model was used to examine the effect of financial decisions on the performance of commercial banks in Nigeria.  The results show that net loans to deposit a finance decision had significant impacts on Return on Asset (ROA) and Return on Capital Employed (ROCE). Likewise Capital Labour Ratio and Capital Earning to Labour Employed both investment decisions were positively significant on Return on Asset (ROA). Also, Earnings per share a dividend decision was only significant on profits. However, liquidity decision was not significant to any of the performance indices. It is against this background that these recommendations were made that banks should pay more attention to other financing decisions such as dividend and liquidity in order to keep the banks at high level of performance which is crucial to their sustainability.

Keywords:  Financial decisions, Investment Decision, Liquidity Decisions, Commercial banks, Nigeria.