Leverage Ratio, Risk-Taking and Stability Vis-A-Vis Nigerian Banking Sector

Chinyere Ihuoma Mgbemena, Emmanuel Chukwuma Ebe, J.U.B. Azubike and Jenevive Chinelo Obiekwe
Additional contact information
Chinyere Ihuoma Mgbemena: Department of Accounting Michael Okpara University of Agriculture, Umudike, Abia State Nigeria
Emmanuel Chukwuma Ebe: Department of Accounting Michael Okpara University of Agriculture, Umudike, Abia State Nigeria
J.U.B. Azubike: Department of Accounting Michael Okpara University of Agriculture, Umudike, Abia State Nigeria
Jenevive Chinelo Obiekwe: Department of Banking and finance, Michael Okpara University of Agriculture, Umudike, Nigeria

International Journal of Research and Innovation in Social Science, 2024, vol. 8, issue 9, 2768-2779

Abstract: The introduction of business income tax required the use of debt capital (leverage) to enhance financial functioning given the tax savings. In consequence, the study significantly investigated the degree and disposition of the relationship between leverage, risk-taking and stability vis-a-vis listed deposit money banks in Nigeria. The study period was 9years (i.e. 2013-2022). The study adopted ex-post facto research design making use of data already in existence. Diagnostic tests carried out indicated absence of unit roots and multi-colinearity. However, skewness, kurtosis Jarque-Beta was tested in presence of non-constant variance is found. Panel least squares, were employed in analyzing data collated from the audited financial statements of the sampled deposit money banks with the aid of E views 9.0. The result reveals that Total debt has positive and significant effect on shareholders’ value in the Nigerian deposit money banks with t-statistics of 7.548348 was greater than 2.0 and probability value of 0.0000 which is less than 0.05. It was also observed that equity securities has positive and significant effect on shareholders’ value in the Nigerian deposit money banks with t-statistics of 4.979062 was greater than 2.0 and probability value of 0.0011 which is less than 0.05. The study further shows that trade payable has positive and significant effect on shareholders’ value in the Nigerian deposit money banks with t-statistics of 4.734520 was greater than 2.0 and probability value of 0.0001 which is less than 0.05. It was equally observed that debt to equity ratio has positive and significant effect on shareholders’ value in the Nigerian deposit money banks with t-statistics of 4.889020 was greater than 2.0 and probability value of 0.0017 which is less than 0.05. It suggested that best possible Debt Management Nigerian deposit money banks should carefully manage their total debt levels. While debt can provide necessary financial leverage, it should be kept at manageable levels to avoid excessive financial risk. Implication of the findings is that banks should monitor their debt structures and ensure they are sustainable over the long term. Again, emphasize Equity Investments is given the positive impact of equity securities on shareholders’ value; banks should consider emphasizing equity investments as part of their financial strategy. This could involve seeking opportunities for equity capital injection or optimizing their existing equity portfolios.

Date: 2024
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.rsisinternational.org/journals/ijriss/ ... ssue-9/2768-2779.pdf (application/pdf)
https://rsisinternational.org/journals/ijriss/arti ... rian-banking-sector/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bcp:journl:v:8:y:2024:i:9:p:2768-2779

Access Statistics for this article

International Journal of Research and Innovation in Social Science is currently edited by Dr. Nidhi Malhan

More articles in International Journal of Research and Innovation in Social Science from International Journal of Research and Innovation in Social Science (IJRISS)
Bibliographic data for series maintained by Dr. Pawan Verma ().