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The relevance of value added reporting in assessing the financial soundness of deposit money banks in Nigeria

Author

Listed:
  • Adaramola , Anthony

    (Department of Banking and Finance, Ekiti State University, Nigeria)

  • Wale-Awe, Olawale

    (Department of Banking and Finance, Ekiti State University, Nigeria)

Abstract

This study examines the effect of value added reporting on the performance of deposit money banks (DMBs) in Nigeria between 2008 and 2017. It adopts two models for analysis using assets and equity (Statement of Financial Position [SFP] indices) as dependent variables while taking dividends, retained earnings, tax and wages (Statement of Value Added [SVA] indices) as independent variables. The study, using the panel regression analytical technique, reveals that SVA indices exert positive influence on asset and equity of the DMBs. Moreover, it shows that all the independent variables exert significant influence on the performance of the DMBs in the two models. The significant positive relationship between the SVA indices and the SFP indices reveals that the SVA functions in consonance with the SFP. This study therefore recommends that regulators should analyse and review the SVA in assessing the financial soundness of banks and that the SVA should be moved from the later end of the financial statements and upgraded to appear immediately after the SFP. This will accord it the importance it exerts and make it visible to regulators, investors, analysts and directors.

Suggested Citation

  • Adaramola , Anthony & Wale-Awe, Olawale, 2017. "The relevance of value added reporting in assessing the financial soundness of deposit money banks in Nigeria," BizEcons Quarterly, Strides Educational Foundation, vol. 1, pages 3-18.
    • Handle: RePEc:ris:buecqu:0001
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    Keywords

    Value Added Reporting; Bank Performance; Retained Earnings; Dividends;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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