Income Diversification and Financial Performance of Selected Deposit Money Banks in Nigeria

Emmanuel Uniamikogbo, Emma I. Okoye and Arowoshegbe O. Amos
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Emmanuel Uniamikogbo: Rhema University, Nigeria
Emma I. Okoye: Nnamdi Azikiwe University, Nigeria
Arowoshegbe O. Amos: Ambrose Alli University, Nigeria

International Journal of Applied Management Sciences and Engineering (IJAMSE), 2021, vol. 8, issue 1, 89-105

Abstract: This study examined the effect of income diversification on financial performance of deposit money banks (DMBs) in Nigeria. Variables considered were commission, foreign exchange incomes, and firm age, which are proxies for income diversification and financial performance proxied by Tobin's Q ratio. The purposive sampling technique was used to select the 8 banks classified by Central Bank of Nigeria to be Domestic Systematically Important Banks in Nigeria. Data collected from the annual reports and the Nigerian Stock Exchange website for a period 2008-2018 were used. Statistical tools used were the descriptive statistics and econometric analysis using the panel data. Findings showed that while commission income has a significant positive effect on Tobin's Q ratio of DMBs, foreign exchange income and firm age each have a significant negative effect on Tobin's Q ratio of DMBs in Nigeria. It is recommended that banks in Nigeria minimize their income from foreign exchange to maximize performance since income from these transactions tend to inhibit bank financial performance.

Date: 2021
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