Effect of Financial Ratio on Corporate Financial Performance of Listed Deposit Money Banks in Nigeria

Abstract

The study examined the effect of financial ratio on the corporate financial performance of listed commercial banks in Nigeria. The specific objective was to ascertain the effect of activity ratio and market value ratio on return on equity. Ex-post facto design was the variant of research design adopted. The population for the study covered all thirteen (13) listed deposit money banks in Nigeria. Secondary data were sourced from the annual reports of ten (10) selected listed deposit money banks from 2012 to 2021. The study utilized Ordinary Least Square regression analysis to establish effect in addition to the descriptive statistical analysis conducted with the use of mean, standard deviation, range values, skewness, kurtosis and Jarque-Bera statistic. It was found that: activity ratio has a non-significant positive effect on the return on equity of listed commercial banks in Nigeria (p > .05); market value to book value ratio has a non-significant negative effect on the return on equity of listed commercial banks in Nigeria (p > .05). In conclusion, banks that reduce their leverage ratios to a level that minimizes their interest expenses and financial risk also attain better financial results. The study recommends that banks should maintain an optimal level of leverage and avoid over-reliance on debt financing