Bank Specific Determinants of Capital Adequacy of Listed Deposit Money Banks in Nigeria.
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ABSTRACT
This study is an empirical analysis of bank specific determinants of capital adequacy of Listed Deposit Money Banks in Nigeria for the period of 2008-2015.
The listed DMBs are 15 as at 31st December, 2015, out of which 14 banks were selected based on the availability of data.
Specifically, the study seeks to identify the effect of Return on Asset, loan, leverage, deposits asset, loan loss provision and liquidity on the capital adequacy of listed deposit money banks in Nigeria.
The study adopts Correlational and expost facto Designs and data were analyzed with the aid of Ordinary Least Square multiple regression technique using 112 firm-year panelled observations.
Data were extracted from the audited annual reports and accounts of the selected banks. The study reveals that loan leverage, loan loss provision and liquidity are negative and have significant impact on the capital adequacy of listed deposit money banks at 5%, 1%, 1% and 1% level of significance respectively.
The study also found out that return on asset and deposits asset have no significant impact on the capital adequacy of listed deposit money banks.
The study concludes that, loan asset, leverage, loan loss provision and liquidity constitute the determinants of capital adequacy of listed deposit money banks.
INTRODUCTION
1.1 Background of the Study
Banks occupy an important position in the financial sector and their activities are subject to regulation and supervision for the purpose of preserving financial stability.
The banking sector of an economy stimulates the economic competence by mobilizing savings to investment channels.
It serves as a bridge between savers and borrowers and to execute all tasks concerned with the profitable and secure channelling of funds.
Beyond the intermediation function, the financial performance of banks has significant implications for economic growth of an economy as sound financial performance rewards the investors and other stakeholders for their investment and encourages additional investment.
On the other hand, poor banking performance may lead to banks‘ failure and collapse which could negatively impact on the economic growth of the economy. Banks serve as means of transmitting monetary policy of the federal government at the macroeconomic level.
At micro economic level, banks are major source of financing for businesses and individuals. Banks therefore facilitate spending and investment that fuel growth in the economy.
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