Effect of Liquidity Management on the Performance of Deposit Money Banks in Nigeria

Ugwu Osmund Chinweoda, Ugwoke Robinson Onuora, Egbere Michael Ikechukwu, Asogwa Cosmas Ikechukwu* and Orji Amelia Ngozika
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Ugwu Osmund Chinweoda: Department of Accountancy, University of Nigeria, Enugu Campus, Nigeria
Ugwoke Robinson Onuora: Department of Accountancy, University of Nigeria, Enugu Campus, Nigeria
Egbere Michael Ikechukwu: Department of Accounting, Veritas University, Abuja, Nigeria
Asogwa Cosmas Ikechukwu*: Department of Accountancy, Renaissance University, Enugu Nigeria
Orji Amelia Ngozika: Department of Business Education, Federal College of Education, Eha-Amufu, Nigeria

The Journal of Social Sciences Research, 2020, vol. 6, issue 3, 300-308

Abstract: In this study, we examined the effect of liquidity management on the performance of banks in Nigeria. Our sample comprised 18 banks included in the Nigerian Stock Exchange (NSE) from 2011 to 2017. Thus, the firm-year sample constitutes 90 (18 banks × 5 years) financial statements. We found that liquidity management positively and significantly affected banks’ profitability. Capital adequacy significantly affected return on assets, return on equity, and return on capital employed. Similarly, we found a significant positive effect of asset quality on the performance indicators. The analyses also showed that the liquidity ratio effect is positive and significant on the performance indicators. This result shows that banks with proper liquidity management will increase their profitability over time. This suggests that to increase the overall networth of shareholders, banks should place a strong emphasis on liquidity management. Thus, liquidity should be managed to minimise potential default risks.

Keywords: Liquidity; Liquidity management; Deposit money banks, Performance; Capital adequacy; Assets quality; Liquidity ratio; Return on assets. (search for similar items in EconPapers)
Date: 2020
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