For correspondence:-
Received: May 17, 2020 Accepted: June 19, 2020 Published: 26 June 2020
Citation: Litigation Infraction Charges andFinancial Performanceof Deposit Money Banks in Nigeria. Account Tax Rev 2005; 4(2):117-133 doi:
© 2005 The authors.
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Abstract
This study investigated the effect of litigationinfraction charges (LICs)arising fromthe settlement of legal violations of agreed terms and conditions banking transactions with counterparties on the financial performance of Deposit Money Banks (DMBs) in Nigeria. Litigation Infraction Charges for DMBs comprises ofLegal Professional Charges (LPCs) and court-imposed Charges (CICs).The specific objectives of this study are to ascertain; firstly, the effect of Legal Professional Charges (LPCs) on the financial performance of DMBs in Nigeria and secondly, the effect of Court-Imposed Charges (CICs)on the financial performance of DMBs in Nigeria. The study adopted the ex-post facto research design. This study made use of secondary data obtained from the Nigerian Stock Exchange factbooks, and Annual reports & accounts of the eight (8) sampled DMBs for its analysis. Purposive sampling technique was adopted to selecteight (8) Domestic Systemically Important Banks (D-SIBs) according to the Central Bank of Nigeria (CBN) 2014 ranking for banks in Nigeria.The population consists of sixteen (16) DMBs whose shares were listed on the Nigerian Stock Exchange as at December 31, 2018. This study made use of Panel Least Square (PLS) regression analysis with the aid of E-View 9.0 statistical software. The results of the regression analyses showed that legal Professional Charges (LPCs), and court-imposed Charges (CICs) eachhas a significantnegative influence on return on Equityof DMBs in Nigeria.The study recommends that deposit money banks should always abide by allterms, conditions and transaction dynamics agreed on terms with customers and counterparties. This willminimise substantial litigation infraction charges awarded to counterparties on legal violation settlements which affect the DMBs’ financial performance.Also, deposit money banks should incorporate Alternative Dispute Resolution (ADR) in their transaction contract documents and also explore ADR option, which is cheaper than court legal proceedings.
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