CREDIT RISK MANAGEMENT AND PROFITABILITY OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Grace Oyeyemi, Ogundajo (), Godwin Emmanuel, Oyedokun () and Innocent, Okwuosa ()
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Grace Oyeyemi, Ogundajo: Department of Accounting, Postal: School of Management Sciences, Babcock University, Ilishan- Remo, Nigeria,, https://www.afarng.org/jfafi/
Godwin Emmanuel, Oyedokun: Department of Accounting, Postal: Faculty of Administration, Nasarawa State University, Keffi, Nigeria, https://www.afarng.org/jfafi/
Innocent, Okwuosa: Accounting & Finance Hertfordshire Business School, Postal: University of Hertfordshire, AL10 9EU, United Kingdom,, https://www.afarng.org/jfafi/

Journal of Forensic Accounting & Fraud Investigation (JFAFI), 2019, vol. 4, issue 2, 142-193

Abstract: Relationships of credit risk management and bank profitability is a topic that has received much attention in financial literature. This study investigates credit management and bank profitability especially the factor of the non-performing loan, loan loss provision and loan and advances and their impact on profitability. This study made use of ex-post facto research design. Data from audited annual reports of 5 sampled deposit money banks listed on the Nigerian stock exchange for the year 2013-2017 were used. Data were analyzed panel regression analysis. The result shows that credit risk management has a significant positive effect on the profitability of Nigerian banks. The non-performing loan has a significant negative effect on return on capital employed, loan loss provision has an insignificant positive effect on return on capital employed and loan and advances has a significant positive effect on return on capital employed. Based on the result obtained, management should employ measures to manage non-performing loan so that its negative effect on profitability might be limited while loan loss provision and loan and advances advantage on profitability should be capitalized upon, bank managers should implement a sound credit risk policy to minimize the incidence of non-performing loans as a default credit risk and bank managers should create a credit rating system for bank loan customers in order guarantee the performance of the loans given out to customers.

Keywords: Bank; Credit risk management; Non-performing loan; Loan loss provision; Return on capital employed; Profitability; Nigeria (search for similar items in EconPapers)
Date: 2019
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Journal of Forensic Accounting & Fraud Investigation (JFAFI) is currently edited by Godwin Emmanuel Oyedokun, Muhammad Akaro Mainoma and Suleiman A. S. Aruwa

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