Dynamics of capital adequacy and profitability of internationalized deposit money banks in Nigeria

Abstract

The study examined the dynamic responses of profitability indexes to capital adequacy ratios of authorized internationalized deposit money banks in Nigeria. The data were sourced from the financial year books of the deposit money banks and analyzed with static and dynamic panel estimators. The static estimator shows that the banks have differences in managerial style, size and profitability. Also, it was revealed that return on asset and return on equity responded positively to asset size, efficiency of the use of asset and current ratio in the static models and they were highly significant. However, they were insignificant in the dynamic specifications except asset size that was significant in the return on asset model showing a weak dynamic response of profitability to capital adequacy ratios. Hence the study recommended that Banks should improve their share based as to increase the asset as this will improve profitability.

Bank-specific performance indicators, macroeconomic variables and capital adequacy of Nigerian banking industry

“…The results show the uniformity of banking policies in the Nigerian banking industry. These results have a different view from the empirical reports of Ikue-John and Nkoro (2019) and Abiodun, et al, (2020) whose studies argued that the specific properties of the banks in Nigeria are fixed. We could trace the differences in the results to time and space.…”

“…We could trace the differences in the results to time and space. The period covered in the present study only accounted for the 2010 banking reform whereas the studies of Ikue-John and Nkoro (2019) and Abiodun, et al, (2020) examined data beyond the 2010 down to 2005 banking reforms in Nigeria and sampled more banks in the industry (Regional, National and internationalized banks). We presented the results from the static and dynamic models on Table 5.…”

“…Another stream of studies has expressed positive relationship between capital adequacy ratio and bank specific-performance indicators (Ozili, 2017;Roman & Danuletiu, 2013;Agbeja et al, 2015;Osaretin & Michael, 2014;Aremu, et al, 2013). Others canvassed opposing views (Jaber & Al-Khawaldeh, 2014;Ikue-John and Nkoro, 2019). This study departs from existing literature as we considered the sample range of 2010 to 2019 to accommodate the twin asset quality crises of 2009 to 2012 and 2014 to 2016.…”

Analysis of Micro Prudential Determinants of Capital Adequacy in Deposit Money Banks

“…(2020). Additionally, there is some tenuous empirical support for the link between capital sufficiency and profitability (Ikue-John & Nkoro, 2019). But unlike the "unique combination of proxies" we utilised in this study, earlier research on "micro-prudential factors" did not.…”