ASSESSING LIQUIDITY DETERMINANTS AND CASH HOLDINGS DECISIONS OF SYSTEMATICALLY IMPORTANT BANKS (SIBS) IN NIGERIA: THE PRE AND POST ECONOMIC RECESSION EXPERIENCE

Ugochukwu J. Nwoye, (uj.nwoye@unizik.edu.ng), Nonye J. Ezenwafor (nj.ezenwafor@unizik.edu.ng) and Emma I. Okoye (eik.okoye@unizik.edu.ng)
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Ugochukwu J. Nwoye,: Department of Accountancy, Postal: Nnamdi Azikiwe University Awka, https://journal.citn.org/
Nonye J. Ezenwafor: Department of Accountancy, Postal: Nnamdi Azikiwe University Awka, https://journal.citn.org/
Emma I. Okoye: Department of Accountancy, Postal: Nnamdi Azikiwe University Awka, https://journal.citn.org/

Journal of Taxation and Economic Development, 2021, vol. 20, issue 1, 78-101

Abstract: This study to evaluates the relationship between liquidity determinants and the cash holding decisions of Systematically Important Banks (SIBs) in the pre and post economic recession periods in Nigeria. Specifically, it intends to determine ascertain the relationship between firm liquidity and cash holding decisions of SIBs in the pre and post economic recession period in Nigeria. It also intends to determine the relationship between Investing activities, Financing activities and Cash holdings of SIBs in Nigeria. The secondary sources of data collection were solely utilized, hence, the adoption of the ex-post facto research design. A total of seven (7) SIBs in Nigeria were purposively sampled, and extracts from their respective financial statements for the pre-economic recession (2011 - 2014) and post economic recession (2015 – 2018) periods duly subjected to relevant analyses using Altman Z-Score model for emerging markets, Pearson Correlation, and the Multiple regression statistical tools. Findings obtained from analyses showed that there is a significant relationship between firm liquidity and cash holding decisions of SIBs in the pre and post economic recession period in Nigeria. It was also observed that the relationship between selected SIBs’ Investing activities, Financing activities and Cash holdings significantly differed. The study thus concluded that although many financial institutions in Nigeria like the (SIBs) were noted to hold cash for varying reasons, most of them maintain cash holdings for investment decision’s purpose. The study therefore recommends that proactive review effort should be made to understand why Systematically Important Banks’ liquidity status across two different periods increased in order to timely rescue possible sick banks from failing. It also recommends that discretion should be adopted by regulatory agencies of the banking sector in Nigeria to ascertain from time-to-time reasons why Systematically Important Banks chose to hold cash to help minimise/curtail risks of unprofitable cash outflow decisions among SIBs in Nigeria.

Keywords: Cash holding decisions; firm liquidity; financing activities; investing activities; liquidity determinants; Systematically Important Banks (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2021
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