Financial Risk Management and the Profitability of Selected Deposit Money Banks in Nigeria

Abstract

This study examined the effect of financial risks on profitability of selected Deposit Money Banks in Nigeria.  The study employed secondary method of data collection. Data collected from the annual financial reports of the sampled Deposit Money banks over the period of 2008 to 2017 were analyzed using both descriptive and inferential statistics. Descriptive analyses conducted in the study include mean analysis while inferential analyses conducted in the study include correlation analysis, random effect regression and fixed effect panel data regression. The results revealed that credit risk has positive but insignificant relationship effect on ROA, ROE and EPS.  Liquidity risk has positive but insignificant relationship effect on ROA and ROE but negative and insignificant relations with EPS.  Interest rate has positive and significant relationship on ROE, while it has positive and insignificant effect on ROA and EPS.  The study recommends that management of Deposit Money Banks in Nigeria should focus on credit risk management and keeping optimal level of liquidity to enables banks meet their contractual commitments and maximize return on assets of Deposit Money Banks in Nigeria.

Keywords: Financial risks, Profitability, Deposit Money Banks,

DOI: 10.7176/EJBM/12-18-13

Publication date:June 30th 2020