Capital Adequacy and Financial Performance of Banks in Nigeria: Empirical Evidence Based on the Fgls Estimator

Umoru, David; Osemwegie, Joy O.

doi:10.19044/esj.2016.v12n25p295

Cited by 14 publications

(10 citation statements)

References 6 publications

(5 reference statements)

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“…These findings indicate that recapitalizations must be large enough to result in additional lending. In another study, Umoru & Osemwegie (2016), used the feasible GLS estimator approach on the pooled panel model to investigate the degree of relevance of the capital adequacy ratio in determining the financial behavior of Nigerian banks from 2007 to 2015. The dominating impact of capital adequacy in enhancing the financing demands of Nigerian banks was substantiated by empirical research.…”

Section: Empirical Reviewmentioning

confidence: 99%

The Effect of Recapitalization on Performance of Deposit Money Banking in Nigeria

Obianuju¹,

Anayochukwu²,

Promise³

et al. 2022

theijhss

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The Effect of Recapitalization on Performance of DepositMoney Banking in Nigeria IntroductionThe banking sector drives capital formation in the financial system by collecting deposit liabilities from surplus economic units, which are then converted into loanable funds of various quantities and distributed as credits to fund users. The role of banks in loan creation has been acknowledged as a crucial growth accelerator (Markjackson, Ekokemi, Nelson, & Okoyan, 2017). The ability of banks to promote economic growth and development, on the other hand, is dependent on the financial system's health, soundness, and capability. Banks, as a significant part of the financial landscape, must be reformed periodically in order to improve their competitiveness and capacity to play a critical role in financing investments, hence recapitalization is one of the most effective strategies to carry out this complex reforms. Monetary authorities raise commercial banks' operational capital on a regular basis to ensure banking industry's strength and sanity. It is a component of banking sector reforms, and various central banks throughout the world have successfully employed it as a monetary policy instrument (Attama & Yuni, 2021).A detailed investigation of Nigerian financial institutions reveals that the banking industry had major liquidity problems between 1989 and 1990. The crisis led to the failure and distress of large banks, which had a negative impact on the economy as a whole. Due to the detrimental effects of the crisis, regulatory authorities forced national and international banks to expand their capital bases from N2 billion to an astounding N25 billion in 2005. The major recapitalization effort which took effect in 2006, delivered financial sector stability, also contributed to boost and preserve depositor and other stakeholder confidence (Ighoroje, Ese and Akpokerere, 2021). Some banks were forced to increase the required amount, resulting in a series of mergers and acquisitions that reduced the number of banks from 89 to 25 in 2005 (CBN, 2006). Due to sharp practices, nonperforming hazardous assets, distresses, and corporate governance difficulties, the number has continued to drop (Osuagwua & Nwokomab, 2017). Undercapitalization, lack of a rigorous risk assessment system, and regulatory leniency on the part of the Central Bank have been blamed by certain experts, including

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Section: Empirical Reviewmentioning

confidence: 99%

The Effect of Recapitalization on Performance of Deposit Money Banking in Nigeria

Obianuju¹,

Anayochukwu²,

Promise³

et al. 2022

theijhss

View full text Add to dashboard Cite

show abstract

“…As an illustration, Weber et al (2010) suggested the practice of an identical worldwide tax on forex dealings. These measures were not explicitly unusual until the 80s (Umoru & Osemwegie, 2016). But, due to the non-stop effort through establishments and the IMF for extra-liberalized emerging markets, the use of capital controls decreased until the Asian disaster (Milcheva et al, 2019).…”

Section: Liquidity Management and Financial Performancementioning

confidence: 99%

Impact of capital adequacy, liquidity management and credit risk management on economic performance: Evidence from Pakistan.

Hussain

Rasheed

2022

JSSMS

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The main purpose of this study is to evaluate the relationship between capital adequacy, liquidity management, credit risk management, and financial performance with moderating role of bank ownership. This study used secondary data approach and collect 10 years panel data from 2012-2021 from the financial statements of the 15 Pakistani commercial banks. State software is used to analyze the data. Results show that there is a positive relationship between capital adequacy, liquidity management, credit risk management, and financial performance. But, on the other hand, there is not a strong moderating effect of bank ownership. The outcomes have been nearly the equal in all samples indicating that foreign ownership is not an important component of profitability in the quarter and as such a public coverage to encourage the presence of foreign banks might also, therefore, no longer yield any advantage in terms of financial institution profitability. This result is robust to the use of regulate- local measures whilst endogeneity concerns are controlled for. Furthermore, the findings imply that the stock liquidity issue of profits management is undoubtedly associated with future stock returns in Chinese corporations. Our outcomes reveal that the inventory liquidity thing of quick- termism in managerial choices performs a crucial role in figuring out destiny inventory returns.

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“…Furthermore, previous empirical studies show that studies involving board composition and bank performance as well as board size and bank performance are mainly investigated using quantitative approaches (Andres & Vallelado, 2008;Duru et al, 2015;Fanta et al, 2013;James & Joseph, 2015;Liu et al, 2015;Mehrotra, 2016;Pandya, 2011;Salim et al, 2016;Zhou et al, 2016). The regulatory monitoring mechanism is represented by the capital adequacy ratio attribute, which emphasizes financial regulation to enhance corporate governance of banks (Andres & Vallelado, 2008;Hwa-Jin, 2016;Onakoya et al, 2012;Umoru & Osemwegie, 2016). Quantitative approaches have been used in studies involving capital adequacy ratio and bank performance (James & Joseph, 2015;Praptiningsih, 2009;Umoru & Osemwegie, 2016).…”

Section: Empirical Reviewmentioning

confidence: 99%

“…The regulatory monitoring mechanism is represented by the capital adequacy ratio attribute, which emphasizes financial regulation to enhance corporate governance of banks (Andres & Vallelado, 2008;Hwa-Jin, 2016;Onakoya et al, 2012;Umoru & Osemwegie, 2016). Quantitative approaches have been used in studies involving capital adequacy ratio and bank performance (James & Joseph, 2015;Praptiningsih, 2009;Umoru & Osemwegie, 2016). A review of empirical research on the disclosure/transparency monitoring mechanism of corporate governance shows that the independent audit committee attribute is used to guide and monitor banks' performance (Fanta et al, 2013;Kamau et al, 2018).…”

Section: Empirical Reviewmentioning

confidence: 99%

Corporate Governance and Commercial Banks’ Performance in Uganda

2020

EJAAFR

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More than ten commercial banks have collapsed in Uganda in the last two decades due to problems such as frauds, insider lending by dominant shareholders, weak boards of directors, non-performing loans portfolios, and managerial opportunism. This paper aims to investigate the impact of corporate governance on commercial banks' performance in Uganda. The study adopted a survey-based approach to purposively collect data from the respondents of all licensed commercial banks in Uganda at the time of the study. Data was collected using a self-administered research instrument on the most emphasized corporate governance variables of board composition, board size, capital adequacy ratio, and the independent audit committee for the performance of banks. The data quality control was ensured by establishing the internal consistency of the research instrument that resulted in an overall Cronbach's reliability coefficient of 0.78. The data was analyzed using hierarchical multiple regression analysis statistical technique after controlling for bank size and leverage. Using an alpha level of 0.05, the study found that the change in R-squared was 27.9% with a non-significant change in F (4,14) = 1.64, p = 0.219. Secondly, for the whole model F (6,14) = 1.587, p = 0.223 which signified that was no significant impact of corporate governance on commercial banks' performance in Uganda while controlling for bank size and leverage. In order to improve bank performance in Uganda, the central bank should step up the supervisory and regulatory policies. This would involve proactive strategies such as regular review of corporate governance instruments like the Financial Institutions Corporate Governance Regulations (2005) so as to counteract any new threats to the banking sector which could render these instruments ineffective.

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Capital Adequacy and Financial Performance of Banks in Nigeria: Empirical Evidence Based on the Fgls Estimator

Cited by 14 publications

References 6 publications

The Effect of Recapitalization on Performance of Deposit Money Banking in Nigeria

The Effect of Recapitalization on Performance of Deposit Money Banking in Nigeria

Impact of capital adequacy, liquidity management and credit risk management on economic performance: Evidence from Pakistan.

Corporate Governance and Commercial Banks’ Performance in Uganda

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