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Analysing Risk Management in Banks: Evidence of Bank Efficiency and Macroeconomic Impact

Omotola Awojobi, Roya Amel and Safoura Norouzi

MPRA Paper from University Library of Munich, Germany

Abstract: The recent Global Economic meltdown triggered by the subprime mortgage crisis of United States in 2007 and its adverse effect on financial markets and participants in the financial industry worldwide have resulted in a capital management crisis in most financial institutions especially banks. This study is a case for the Nigerian banking industry, focusing on factors affecting risk management efficiency in banks. For empirical investigation, we employed Panel regression analysis taking a stratum of time series data and cross-sectional variants of macro and bank-specific factors for period covering 2003 to 2009. Result for panel regression indicates that risk management efficiency in Nigerian banks is not just affected by bank-specific factors but also by macroeconomic variables. This describes the pro-cyclicality of bank performance in the Nigerian banking sector. As it stands, the sufficiency of Basel principles for risk management is doubtful because asset quality varies with business cycles.

Keywords: Risk management; Nigerian banks; capital adequacy; Basel; cyclicality (search for similar items in EconPapers)
JEL-codes: E31 G21 G31 (search for similar items in EconPapers)
Date: 2011-04-06, Revised 2011-07-17
New Economics Papers: this item is included in nep-ban, nep-eff, nep-fdg, nep-mac and nep-rmg
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