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Effect of Liquidity Risk on Shareholders Value of Listed Commercial Banks in Nigeria

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Abstract

Liquidity risk reflects the insufficient liquid assets to meet bank's obligation. The study examined the effect of liquidity risk on shareholders value of listed commercial banks in Nigeria. Liquidity risk was proxied by loan to deposit and current ratio, while shareholders value was proxied by Tobin's Q. The panel data were collected from the individual bank annual financial report of the listed commercial banks in Nigeria. Ordinary least square regression was used to analyze the hypothesis significant effect between liquidity risk and shareholders value with the aid of E-views 11. The results revealed that loan to deposit and current ratio had a negative significant effect on Tobin's Q of deposit money banks in Nigeria. In line with the findings, this study recommends that the management of DMBs should increase the current assets held in as cash ratio with marketable securities, so that it could yield higher return before paying its liabilities. Also, with the increase of loan to deposit ratio to 65%, the Central Bank of Nigeria should employ other measures to control and make sure loans are given to customers, not diverted for another purpose.

Suggested Citation

  • Maurie Nneka , Nwala, & Hope Ikechukwu, Osuagwu,, 2022. "Effect of Liquidity Risk on Shareholders Value of Listed Commercial Banks in Nigeria," Multidisciplinary Journal of Management Sciences, Association of Forensic Accounting Researchers (AFAR), vol. 4(2), pages 39-50, June.
    • Handle: RePEc:ris:amjoms:0054
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