Original Research Article | OPEN ACCESS
Capital Adequacy and Financial Performance of Deposit Money Banks with International Authorization in Nigeria

,Almustapha A. ALIYU1 Nuruddeen Abba Abba ABDULLAHI2 Taophic Olarewaju BAKARE3

1Department of Accounting and Finance, UsmanuDanfodiyo University, Sokoto, Nigeria; 2Dangote Business School, Bayero University, Kano, Nigeria; 3Department of Accounting and Finance, UsmanuDanfodiyo University, Sokoto, Nigeria.

For correspondence:-  ,Almustapha ALIYU   Email: abubackrie@gmail.com

Received: November 1, 2020        Accepted: December 20, 2020        Published: December 31, 2020

Citation: ALIYU ,A.ABDULLAHI NA.BAKARE TO. Capital Adequacy and Financial Performance of Deposit Money Banks with International Authorization in Nigeria. Account Tax Rev 2020; 4(4):78-91 doi:

© 2020 The authors.
This is an Open Access article that uses a funding model which does not charge readers or their institutions for access and distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0) and the Budapest Open Access Initiative (http://www.budapestopenaccessinitiative.org/read), which permit unrestricted use, distribution, and reproduction in any medium, provided the original work is properly credited..

Abstract

This study examines the nexus between capital adequacy and financial performance of deposit money banks (DMBs) in Nigeria. Secondary data were obtained from the audited financial statements of all the eight (8) deposit money banks with International Authorization listed on the Nigerian Stock Exchange spanningfrom 2012-2019. Data were analysed using panelregression techniques. Results showed that loans and advances (LAD) have a positive and significant effect on the financial performance of DMBs with international authorisation in Nigeria. The study concluded that capital adequacy has positive relationship with thefinancial performance of DMBsin Nigeria. Itrecommends that the Central Bank of Nigerianeed to increase the minimum capital base of deposit money banks in Nigeria, since the current ?25 billion and ?50 billion minimum capital baselicense requirement for DMBs with national and international authorisationcannot justify the banking reality of today, especially as a result of the continuous depreciation of the value of local currency naira in the foreign exchange market.

Keywords: Capital Adequacy, Basle Accord, Loans and Advances, Return on Equity, Banks


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