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Liquidity Risk Management and Financial Performance of Listed Commercial Banks in Nigeria

Author

Listed:
  • POROYE Isioma Rosemary

    (Postgraduate Student, Department of Accounting, Faculty of Management Sciences, Delta State University Abraka)

  • OKOLIE, A.O.

    (Department of Accounting, Faculty of Management Sciences, Delta State University Abraka)

Abstract

The study investigates the relationship between liquidity risk management and financial performance of listed commercial banks in Nigeria. To achieve this, liquidity risk management proxies which have been widely used in the literature were employed namely deposit to total asset, total loan to deposit, liquidity asset to total asset and short-term liability to total asset ratios (independent variables) and a measure of financial performance return on asset (dependent variable). Ex-post facto research design was employed and panel data sourced from the yearly published annual reports and accounts of listed commercial banks in Nigeria. The fixed and random effects panel regression results reveal mixed evidence suggesting that the effect of liquidity risk management on financial performance of the listed commercial banks in Nigeria depends largely on measures of liquidity risk management used in this study. One key policy implication of this outcome is that maintaining a balanced lending and funding strategy is crucial for commercial banks. Hence, it recommends among others that managers of listed commercial banks in Nigeria should find an optimal balance that aligns with bank’s risk appetite and growth objectives and should also exercise caution in expanding lending.

Suggested Citation

  • POROYE Isioma Rosemary & OKOLIE, A.O., 2024. "Liquidity Risk Management and Financial Performance of Listed Commercial Banks in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(5), pages 1830-1845, May.
    • Handle: RePEc:bcp:journl:v:8:y:2024:i:5:p:1830-1845
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    References listed on IDEAS

    as
    1. Sunusi Yahaya Enejoh & Ahmad Muhammad Tsauni, 2017. "An Analytical Study of the Impact of Inflation on Economic Growth in Nigeria (1970-2016)," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 7(4), pages 110-120, October.
    2. Alex Muriithi Njue & Samuel Nduati Kariuki & Duncan Mugambi Njeru, 2020. "Liquidity Management and Financial Performance of Microfinance Institutions in Kenya," The Journal of Social Sciences Research, Academic Research Publishing Group, vol. 6(11), pages 943-953, 11-2020.
    3. C.R. Sathyamoorthi & Mogotsinyana Mapharing & Mashoko Dzimiri, 2020. "Liquidity Management and Financial Performance: Evidence From Commercial Banks in Botswana," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 399-413, October.
    4. Alim, Wajid & Ali, Amjad & Metla, Mahwish Rauf, 2021. "The Effect of Liquidity Risk Management on Financial Performance of Commercial Banks in Pakistan," MPRA Paper 112482, University Library of Munich, Germany.
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