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Impact of Liquidity Management on Capital Adequacy Ratio of Listed Deposit Money Banks in Nigeria

Author

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  • MOHAMMED, Badamasi Idris

    (Department of Banking and Finance, Nasarawa State University, Keffi.)

  • NWALA MAUREEN, Nneka

    (Department of Banking and Finance, Nasarawa State University, Keffi.)

  • MOHAMMED, Jibril

    (Department of Accounting, Federal University of Lafia.)

Abstract

The study examines the impact of liquidity management on Capital Adequacy Ratio of listed deposit money banks in Nigeria during the period 2012-2022. Proxy used to measure liquidity management are loan to deposit ratio and liquidity ratio, while capital adequacy ratio was the dependent variable. Panel data was used to analyse the data sourced from the individual financial reports of the listed deposit money banks in Nigeria. The sample adopted twelve (12) listed deposit money banks out of the fifteen (15) deposit money banks traded in the Nigerian exchange group (NGX). The study employed panel regression model to estimate the key relationship between liquidity management and Capital Adequacy Ratio. The result showed that loan to deposit ratio has insignificant effect on capital adequacy of listed deposit money banks in Nigeria, while liquidity has significant effect on capital adequacy of listed deposit money banks in Nigeria. The study recommended that managers of deposit money banks should ensure not to exceed the LDR regulatory limit so as to avoid sanction by the regulatory authority. The study also recommended that managers of deposit money banks should manage their liquid asset efficiently, in order to meet up their day to day financial obligations which will increase capital adequacy ratio.

Suggested Citation

  • MOHAMMED, Badamasi Idris & NWALA MAUREEN, Nneka & MOHAMMED, Jibril, 2023. "Impact of Liquidity Management on Capital Adequacy Ratio of Listed Deposit Money Banks in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(12), pages 1762-1774, December.
    • Handle: RePEc:bcp:journl:v:7:y:2023:i:12:p:1762-1774
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    References listed on IDEAS

    as
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    3. Wagdi Kalifa & Eralp Bektaş, 2018. "The impacts of bank-specific and macroeconomic variables on the capital adequacy ratio: evidence from Islamic banks," Applied Economics Letters, Taylor & Francis Journals, vol. 25(7), pages 477-481, April.
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    6. Thi Hien Nguyen, 2020. "Impact of Bank Capital Adequacy on Bank Profitability under Basel II Accord: Evidence from Vietnam," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 45(1), pages 31-46, March.
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