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Impact of Risk Management on Loan and Profitability of Deposit Money Banks in Nigeria
Author(s)
Mbatuegwu, Christopher David , Lawal, Sagir , Umar Abdullahi Adudu ,
Download Full PDF Pages: 48-65 | Views: 37 | Downloads: 9 | DOI:
Abstract
The study looked at how risk management affects the Loan and profitability of Nigerian deposit money institutions. The study used an expose factor research design, with the population consisting of all twenty-one banks listed on the Nigerian stock market floor. As the sample size for analysis, seven banks were selected from the study's population. STATA 14 was used to produce data for the research period from these banks' annual reports and accounts. The study used fixed effect, random effect, and pooled OLS panel data techniques for analysis, with the Breusch-Pagan LM test and the F-tesl used to test for random and fixed effects, respectively. Profitability was found to have a statistically significant beneficial influence on default rate loan loss provision when evaluated by return on assets (ROA) (LLP). The capital adequacy ratio (CAR) has a statistically significant beneficial influence on profitability. It was also suggested that deposit money banks in Nigeria improve their credit analysis and loan administration capabilities to avoid making excessive provisions on non-performing loans, while regulatory authorities should pay close attention to the bank's compliance with the prudential guidelines and IFRS on loan loss provision. The CBN and other authorities should endeavor to ensure that Nigerian banks follow all banking legislation and provide prudential guidance. Banks should have enough capital on hand to serve as a buffer against loan losses, since this will boost depositor trust, attract a broad client base, and allow them to compete internationally with other banks.
Keywords
Risk Management, Loan And Profitability, Deposit Money Banks
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