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Bank-Specific Asset Quality and Return on Asset in Selected Nigerian Deposit Money Banks

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Abstract

The banking industry has witnessed several changes in the last decade from partial to full digital transformation which improved customer engagement, especially in the area of granting loans with implications on their profitability. The loan being given to the customers enhance their economic performance leading to the sustainable growth of Nigeria economy. This study investigated the effect of asset quality on the return on assets of selected Deposit Money Banks (DMBs) in Nigeria. The study was anchored on Liabilities Management Theory. The study adopted an ex-post facto design which entails the utilization of historical data to forecast future trends. Inferential statistics adopted econometrics models with panel data using pooled ordinary least squares. The population comprises twenty-three (23) DMBs in Nigeria. The sample size consisted of seven (7) banks based on the purposive sampling method. The results revealed that asset quality has a significant effect on return on assets. It was therefore recommended amongst others that banks should review their credit policy regularly that will reduce non-performing loans and the DMBs should also re-strategize their policy on deposit mobilization that will minimize the impact of Payment Service Banks (PSBs).

Suggested Citation

  • Abraham Olayinka, Oluseyi, 2022. "Bank-Specific Asset Quality and Return on Asset in Selected Nigerian Deposit Money Banks," Journal of Forensic Accounting & Fraud Investigation (JFAFI), Association of Forensic Accounting Researchers (AFAR), vol. 7(1), pages 101-119, January -.
    • Handle: RePEc:ris:jfaafi:0059
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