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Capital Adequacy And Banks’ Profitability Of Deposit Taking: An Empirical From Nigeria

Author

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  • Asikhia Olalekan

    (Associate Professor of Strategic Management and Marketing, Department of Business Administration and Marketing, Babcock Business School Babcock University, Illisan- Remo, Ogun State, Nigeria)

  • Sokefun Adeyinka

    (Lecturer, Department of Financial Studies, College of Management Sciences, Redeemers University, Mowe, Ogun State, Nigeria)

Abstract

This paper sets out to examine the effect of capital adequacy on profitability of deposit- taking banks in Nigeria. It seeks to assess the effect of capital adequacy of both foreign and domestic banks in Nigeria and their profitability. The paper present primary data collected by questionnaires involving a sample of 518 distributed to staff of banks with a response rate of 76%. Also published financial statement of banks were used from 2006 - 2010. The findings for the primary data analysis revealed a non-significant relationship but the secondary data analysis showed a positive and significant relationship between capital adequacy and profitability of bank. This implies that for deposit- taking banks in Nigeria, capital adequacy plays a key role in the determination of profitability. It was discovered that capitalization and profitability are indicators of bank risk management efficiency and cushion against losses not covered by current earnings.

Suggested Citation

  • Asikhia Olalekan & Sokefun Adeyinka, 2013. "Capital Adequacy And Banks’ Profitability Of Deposit Taking: An Empirical From Nigeria," Far East Journal of Psychology and Business, Far East Research Centre, vol. 13(4), pages 32-41, October.
    • Handle: RePEc:fej:articl:v:13a:y:2013:i:4:p:32-41
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    References listed on IDEAS

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    Cited by:

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    2. Kelvin Friday Barida Biiranee, 2021. "Retail Banking and Bank Performance: Evidence from Nigeria," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 13(5), pages 1-45, May.
    3. J. Navas & P. Dhanavanthan & D. Lazar, 2021. "Is Risk Based Capital Ratio a True Measure of the Soundness of Banks? Evidence From India," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(3), pages 92-102, May.
    4. Isah Serwadda, 2018. "Determinants of Commercial Banks' Profitability. Evidence from Hungary," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 66(5), pages 1325-1335.
    5. Nenubari Ikue John & Emeka Nkoro, 2019. "Dynamics of capital adequacy and profitability of internationalized deposit money banks in Nigeria," International Journal of Business Ecosystem & Strategy (2687-2293), Bussecon International Academy, vol. 1(4), pages 01-08, October.
    6. Roukia Bouhider, 2021. "Econometric study of the effect of deposits on Islamic Banks profitability: Evidence from Malaysia," Economics Bulletin, AccessEcon, vol. 41(3), pages 1292-1302.
    7. Peter Ego Ayunku, 2017. "An Evaluation of Liquidity Management and Banks Performance in Nigeria: A Correlation Matrix Approach," Noble International Journal of Business and Management Research, Noble Academic Publsiher, vol. 1(8), pages 123-128, August.
    8. Nilgün ACAR-BALAYLAR & Mehmet Ozan ÖZDEMİR, 2018. "Capital Adequacy and Profitability Relationship for Foreign Deposit Banks in Turkey," Sosyoekonomi Journal, Sosyoekonomi Society, issue 26(36).

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    More about this item

    Keywords

    Capital adequacy; Profitability; Domestic banks; Foreign banks; Deposit taking bank;
    All these keywords.

    JEL classification:

    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

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