RISK MANAGEMENT AND PROFITABILITY OF QUOTED BANKS IN NIGERIA

Taiwo Olarinre Oluwaleye, Funso Tajudeen Kolapo, Adeola Oluwakemi Adejayan

Abstract


The role of risk management in the performance of banks cannot be over-emphasized. This study, therefore, examines the effect of risk management on bank profitability in Nigeria by employing correlation analysis, pooled ordinary least square estimate, and fixed and random effect estimations between 2007 and 2020. Secondary data on return on asset (dependent variable), Liquidity risk, Credit Risk, Operational Risk, Market Risk, Capital Risk and Bank size are sourced from annual audited accounts of six deposit money banks listed on NSE. The result reveals that return on asset is negatively impacted by liquidity risk, capital risk and bank size while it significantly and positively impacted marketing risk but insignificantly and positively related to operational risk and credit risk. The study concludes that there is a slight tendency for liquidity risk and capital risk to reduce the return on asset. In Nigeria, credit risk continues to be the biggest threat to commercial banks, making precise measurement and credit risk management absolutely essential. Therefore, it is recommended that managements of listed commercial banks should support sound operational and credit risk management. This is paramount in order to engender a positive risk culture in line with best global practices that would prevent financial crisis and improve commercial banks' performance in Nigeria, among other countries.

JEL: G21, G32

 

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Keywords


risk management, bank profitability, liquidity risk, credit risk, market risk

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DOI: http://dx.doi.org/10.46827/ejefr.v7i1.1449

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