Risk Management Approach and Banks’ Portfolio Investment Performance in Nigeria

Abstract

The study examined risk management approach and banks’ portfolio investment performance in Nigeria. The study hypothesized that there is no relationship between risk management and banks’ portfolio investment performance in Nigeria. Employing secondary data based on a 5 year annual reports and financial statements of accounts of 10 Deposit Money Banks (DMBs) in Nigeria and using the Generalized Method of Moment (GMM), the result shows a negative but significant relationship between risk management and banks’ portfolio investment performance measured by Return on Asset (ROA) while the explanatory variables were measured by credit risk (CRD) doubtful and non performing loans (NPLS), liquidity risk (LQR) measured by current ratio and market risk (MKR) measured by interest rate. In the light of the foregoing findings and using the result of the t-statistic, the study rejects the null hypothesis and concludes that a significant relationship exists between risk management approach and banks’ portfolio investment performance and thus recommends the need for banks to practise prudential risks management approach as risk management is critical in the banking sector in order to improve on their portfolio investment performance so as to protect not just both the stakeholders and shareholders’ interest but also the national economic growth and general macroeconomic stability and business development.

Keywords: Banking Sector, Financial Statement, Portfolio Performance, Risk Management.

DOI: 10.7176/RJFA/10-6-10

Publication date:March 31^st 2019