Impact of Liquidity Management on Capital Adequacy Ratio of Listed Deposit Money Banks in Nigeria

Badamasi Idris Mohammed, Nneka Nwala Maureen and Jibril Mohammed
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Badamasi Idris Mohammed: Department of Banking and Finance, Nasarawa State University, Keffi.
Nneka Nwala Maureen: Department of Banking and Finance, Nasarawa State University, Keffi.
Jibril Mohammed: Department of Accounting, Federal University of Lafia.

International Journal of Research and Innovation in Social Science, 2023, vol. 7, issue 12, 1762-1774

Abstract: The study examines the impact of liquidity management on Capital Adequacy Ratio of listed deposit money banks in Nigeria during the period 2012-2022. Proxy used to measure liquidity management are loan to deposit ratio and liquidity ratio, while capital adequacy ratio was the dependent variable. Panel data was used to analyse the data sourced from the individual financial reports of the listed deposit money banks in Nigeria. The sample adopted twelve (12) listed deposit money banks out of the fifteen (15) deposit money banks traded in the Nigerian exchange group (NGX). The study employed panel regression model to estimate the key relationship between liquidity management and Capital Adequacy Ratio. The result showed that loan to deposit ratio has insignificant effect on capital adequacy of listed deposit money banks in Nigeria, while liquidity has significant effect on capital adequacy of listed deposit money banks in Nigeria. The study recommended that managers of deposit money banks should ensure not to exceed the LDR regulatory limit so as to avoid sanction by the regulatory authority. The study also recommended that managers of deposit money banks should manage their liquid asset efficiently, in order to meet up their day to day financial obligations which will increase capital adequacy ratio.

Date: 2023
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