Effect of Financial Metrics on Risk Indicators in Nigeria Listed Deposit Money Banks

Anderson Emmanuel Oriakpono; Sowunmi Bolanle Musiliu

doi:doi:10.11648/j.ijfbr.20241004.12

Research Article |

| Peer-Reviewed

Effect of Financial Metrics on Risk Indicators in Nigeria Listed Deposit Money Banks

Anderson Emmanuel Oriakpono^*

, Sowunmi Bolanle Musiliu

Published in International Journal of Finance and Banking Research (Volume 10, Issue 4)

Received: 11 August 2024 Accepted: 28 August 2024 Published: 23 September 2024

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

Abstract

This study investigates the effect of financial metrics on risk indicators in Nigerian deposit money banks. The analysis employs yearly time series data spanning from 2007 to 2022, acquired from the Exchange Group PLC. Descriptive statistics, panel unit root tests, Hausman tests, and Panel Ordinary Least Squares (OLS) procedures were used at a 95% confidence interval. The study utilized secondary data sourced from the Exchange Group PLC database. The R-squared (0.564390) and Adjusted R-squared (0.540629) values indicate that the models have strong explanatory power. The results show that all variables are stationary at their levels (I(0)). The primary financial metrics influencing risk indicators among deposit money banks in Nigeria are revenue growth, net interest margin, and earnings per share. It was recommended that banks should implement effective risk management systems that can handle increased complexity and scale of operations, and regularly update them, leveraging blockchain technology for decentralized risk management as it relates to revenue growth rate of banks. Maintain a healthy net interest margin through effective risk management practices and internal controls, and utilize this strength to invest in risk mitigation measures, introducing incentive programs to encourage employee involvement in risk management. Conduct regular financial reviews and audits to ensure accurate earnings reporting and risk identification, utilizing AI-powered tools for earnings analysis to identify anomalies and potential risks. Prioritize prudent lending practices and effective risk management to maintain financial stability, implementing dynamic adjustments to the debt-to-equity ratio in response to changes in risk detection needs.

Published in	International Journal of Finance and Banking Research (Volume 10, Issue 4)
DOI	10.11648/j.ijfbr.20241004.12
Page(s)	74-83
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Financial Metrics, Risk Indicators, Deposit Money Banks, Risk Management, Nigeria

References

[1]	Acharya, V. V., Cooley, T., Richardson, M., & Walter, I. (2017). Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance. John Wiley & Sons.
[2]	Adebayo, T., Okoro, J., & Adesanya, K. (2021). Impact of risk management on financial performance in Nigerian banks. Journal of Banking & Finance, 35(3), 56-72.
[3]	Adefila, J. J., & Adeyemi, K. S. (2020). Risk indicators in the Nigerian banking sector. International Journal of Banking and Finance, 32(1), 45-60.
[4]	Adigun, T. (2020). Financial risk management in Nigerian banks. Journal of Banking and Finance, 14(3), 234-256.
[5]	African Development Bank. (2023). Financial stability and risk indicators in African banks. ADB Publications.
[6]	Agyapong, D., & Boateng, P. (2018). Challenges in the African banking sector. African Finance Review, 22(4), 189-205.
[7]	Allen, F., Carletti, E., & Marquez, R. (2020). Deposits and bank capital structure. Journal of Financial Economics, 136(3), 587-605. https://doi.org/10.1016/j.jfineco.2019.09.009
[8]	Anginer, D., Demirgüç-Kunt, A., & Zhu, M. (2014). How does deposit insurance affect bank risk? Evidence from the recent crisis. Journal of Banking & Finance, 48, 312-321. https://doi.org/10.1016/j.jbankfin.2013.09.013
[9]	Beck, T., De Jonghe, O., & Schepens, G. (2013). Bank competition and stability: Cross-country heterogeneity. Journal of Financial Intermediation, 22(2), 218-244. https://doi.org/10.1016/j.jfi.2012.07.001
[10]	Bello, A. K., & Adebayo, B. S. (2021). Financial metrics and risk management in Nigerian banks. Journal of Financial Studies, 15(3), 189-205.
[11]	Central Bank of Nigeria. (2024). Annual report on financial stability. CBN Publishing.
[12]	Chen, Y. (2019). Advanced financial technologies and risk management. Global Financial Journal, 33(2), 98-112.
[13]	Chukwu, O. (2018). Financial metrics and bank performance. Nigerian Journal of Economics, 27(1), 45-63.
[14]	Chukwuma, I., & Nnamdi, O. (2022). The effect of risk management on revenue growth in the banking sector. Nigerian Journal of Economic Studies, 29(2), 45-60.
[15]	Claessens, S., & Van Horen, N. (2014). Foreign banks: Trends, impact and financial stability. Journal of Financial Intermediation, 23(4), 387-411. https://doi.org/10.1016/j.jfi.2014.04.001
[16]	Dechow, P. M., Ge, W., & Schrand, C. (2011). Understanding earnings quality: A review of the proxies, their determinants and their consequences. Journal of Accounting and Economics, 50(2-3), 344-401.
[17]	Demirgüç-Kunt, A., & Huizinga, H. (2010). Bank activity and funding strategies: The impact on risk and return. Journal of Financial Economics, 98(3), 626-650. https://doi.org/10.1016/j.jfineco.2010.06.005
[18]	DeYoung, R., & Torna, G. (2013). Nontraditional banking activities and bank failures during the financial crisis. Journal of Financial Intermediation, 22(3), 397-421. https://doi.org/10.1016/j.jfi.2013.01.001
[19]	Dietrich, A., & Wanzenried, G. (2011). Determinants of bank profitability before and during the crisis: Evidence from Switzerland. Journal of International Financial Markets, Institutions and Money, 21(3), 307-327. https://doi.org/10.1016/j.intfin.2010.11.002
[20]	Exchange Group PLC. (2021). Annual report. Lagos, Nigeria.
[21]	Eze, O. R., & Nwankwo, O. (2019). Financial metrics as predictors of risk indicators in Nigerian banks. African Journal of Economic and Management Studies, 10(2), 176-189.
[22]	Eze, P. (2021). Understanding risk indicators in financial institutions. International Journal of Finance, 29(2), 150-175.
[23]	Fama, E. F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33(1), 3-56. https://doi.org/10.1016/0304-405X(93)90023-5
[24]	Gambacorta, L., & Shin, H. S. (2018). Why bank capital matters for monetary policy. Journal of Financial Intermediation, 35, 17-29. https://doi.org/10.1016/j.jfi.2016.09.005
[25]	Ghosh, A. (2015). Banking-industry specific and regional economic determinants of non-performing loans: Evidence from US states. Journal of Financial Stability, 20, 93-104. https://doi.org/10.1016/j.jfs.2015.08.004
[26]	Grossman, S. J., & Hart, O. D. (1986). The costs and benefits of ownership: A theory of vertical and lateral integration. Journal of Political Economy, 94(4), 691-719. https://doi.org/10.1086/261404
[27]	Healy, P. M., & Wahlen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 13(4), 365-383.
[28]	Holmström, B. (1982). Moral hazard in teams. The Bell Journal of Economics, 13(2), 324-340. https://doi.org/10.2307/3003457
[29]	Ibrahim, M. (2021). Detecting financial anomalies using metrics. Journal of Financial Analysis, 18(3), 67-88.
[30]	Ijeoma, N. B. (2014). The impact of creative accounting on financial statements: The Nigerian experience. International Journal of Innovation and Applied Studies, 9(1), 145-153.
[31]	International Monetary Fund. (2023). The impact of financial metrics on risk indicators. IMF Reports.
[32]	Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360. https://doi.org/10.1016/0304-405X(76)90026-X
[33]	Johnson, L. (2020). Early detection of financial risks in banks. Journal of Risk Management, 16(1), 23-39.
[34]	Johnson, P. (2021). Risk management and financial stability in emerging markets. Global Finance Journal, 23(2), 89-103.
[35]	Khan, T., & Akhtar, S. (2017). Risk management in financial institutions. Journal of Banking & Finance, 30(4), 450-467.
[36]	Kumar, S. (2020). Global financial risks: Emerging trends. World Banking Journal, 45(3), 101-127.
[37]	Kumar, S. (2020). The application of z-scores in financial fraud detection. Journal of Financial Regulation and Compliance, 28(4), 512-525.
[38]	Laeven, L., & Levine, R. (2009). Bank governance, regulation and risk taking. Journal of Financial Economics, 93(2), 259-275. https://doi.org/10.1016/j.jfineco.2008.09.003
[39]	Marcucci, J., & Quagliariello, M. (2009). Asymmetric effects of the business cycle on bank credit risk. Journal of Banking & Finance, 33(9), 1624-1635. https://doi.org/10.1016/j.jbankfin.2009.03.004
[40]	Mwangi, J. (2021). Financial transactions and risk in African banks. African Economic Review, 19(4), 321-340.
[41]	Naceur, S. B., & Omran, M. (2011). The effects of bank regulations, competition, and financial reforms on banks' performance. Emerging Markets Review, 12(1), 1-20. https://doi.org/10.1016/j.ememar.2010.08.002
[42]	Nduka, C. (2017). Regulatory frameworks and banking stability. Journal of African Finance, 21(2), 88-103.
[43]	Nigeria Exchange Ltd. (2022). Yearly financial performance of listed companies on the Nigerian Exchange (2007–2022). Nigeria Exchange Ltd. https://www.nigerianexchange.com/reports/2007-2022-financial-performance
[44]	Nwosu, I., & Uzochukwu, N. (2020). Risk management and its impact on net interest margin in Nigerian banks. African Financial Review, 18(4), 34-48.
[45]	Obi, C., & Adeyemi, T. (2020). Financial metrics and risk identification. Nigerian Financial Review, 30(1), 56-78.
[46]	Oboh, C. S. (2018). Revenue growth as a risk indicator in Nigerian banks. Journal of Financial Risk Management, 7(2), 112-124.
[47]	Ojo, A. (2019). Metrics in banking performance analysis. International Journal of Banking, 22(1), 89-105.
[48]	Ojo, M. (2020). Challenges in risk management in Nigerian banks. Nigerian Journal of Financial Studies, 25(2), 221-235.
[49]	Okafor, C., & Okeke, P. (2022). Risk management practices and financial metrics: Evidence from Nigeria. Global Journal of Economics and Finance, 41(1), 78-92.
[50]	Okafor, C., Adeoye, A., & Emeka, A. (2022). Financial ratios and risk detection in the Nigerian banking industry. Nigerian Journal of Economic and Social Studies, 64(1), 92-108.
[51]	Okeke, F., & Daniel, O. (2021). The impact of financial risks on Nigerian banks. Journal of Financial Crimes, 12(2), 234-249.
[52]	Olajide, B., & Onwumere, G. (2021). Costs of risk management and its effects on financial performance in Nigerian banks. West African Economic Journal, 27(3), 67-81.
[53]	Olajide, D., & Onwumere, J. (2018). Financial metrics and their impact on net interest margin in Nigerian banks. Journal of Finance and Investment Analysis, 7(1), 45-60.
[54]	Ologunde, A. (2019). Debt-to-equity ratio as a financial leverage indicator in Nigerian banks. West African Financial Journal, 11(3), 303-315.
[55]	Olowokure, O. (2016). The role of earnings per share in investment decisions in the Nigerian stock market. African Journal of Business Management, 10(12), 291-305.
[56]	Olowookere, E. (2019). Risk factors in Nigerian deposit money banks. Journal of Nigerian Banking, 19(3), 150-169.
[57]	Onwumere, G., & Olajide, B. (2021). The downside of risk management: Short-term impacts on earnings per share. Journal of Financial Risk Management, 22(1), 23-37.
[58]	Oriakpono, A. E., & Musiliu, S. B. (2022). Financial performance of quoted banks in Nigeria and corporate governance structure. International Journal of Management Studies and Social Science Research, 4(1), 85–95.
[59]	Peters, J., & Williams, H. (2019). Forensic investigations in banking. Journal of Forensic Accounting, 11(1), 44-60.
[60]	Ross, S. A. (1977). The determination of financial structure: The incentive-signalling approach. Bell Journal of Economics, 8(1), 23-40.
[61]	Sanusi, L. S. (2019). The impact of interest rate changes on the performance of Nigerian banks. Journal of Banking Regulation, 20(2), 78-94.
[62]	Spence, M. (1974). Market signaling: Informational transfer in hiring and related screening processes. Harvard University Press.
[63]	Thomas, M. (2018). Stability and reliability in the financial system. Journal of Economic Stability, 14(2), 112-130.
[64]	Vives, X. (2016). Competition and stability in banking: The role of regulation and competition policy. Princeton University Press.
[65]	Yusuf, A. (2018). Methods to prevent financial risks in banks. Journal of Banking Research, 25(2), 89-104.

Cite This Article

Plain Text BibTeX RIS

APA Style

Oriakpono, A. E., Musiliu, S. B. (2024). Effect of Financial Metrics on Risk Indicators in Nigeria Listed Deposit Money Banks. International Journal of Finance and Banking Research, 10(4), 74-83. https://doi.org/10.11648/j.ijfbr.20241004.12

Copy | Download

ACS Style

Oriakpono, A. E.; Musiliu, S. B. Effect of Financial Metrics on Risk Indicators in Nigeria Listed Deposit Money Banks. Int. J. Finance Bank. Res. 2024, 10(4), 74-83. doi: 10.11648/j.ijfbr.20241004.12

Copy | Download

AMA Style

Oriakpono AE, Musiliu SB. Effect of Financial Metrics on Risk Indicators in Nigeria Listed Deposit Money Banks. Int J Finance Bank Res. 2024;10(4):74-83. doi: 10.11648/j.ijfbr.20241004.12

Copy | Download

@article{10.11648/j.ijfbr.20241004.12,
  author = {Anderson Emmanuel Oriakpono and Sowunmi Bolanle Musiliu},
  title = {Effect of Financial Metrics on Risk Indicators in Nigeria Listed Deposit Money Banks
},
  journal = {International Journal of Finance and Banking Research},
  volume = {10},
  number = {4},
  pages = {74-83},
  doi = {10.11648/j.ijfbr.20241004.12},
  url = {https://doi.org/10.11648/j.ijfbr.20241004.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20241004.12},
  abstract = {This study investigates the effect of financial metrics on risk indicators in Nigerian deposit money banks. The analysis employs yearly time series data spanning from 2007 to 2022, acquired from the Exchange Group PLC. Descriptive statistics, panel unit root tests, Hausman tests, and Panel Ordinary Least Squares (OLS) procedures were used at a 95% confidence interval. The study utilized secondary data sourced from the Exchange Group PLC database. The R-squared (0.564390) and Adjusted R-squared (0.540629) values indicate that the models have strong explanatory power. The results show that all variables are stationary at their levels (I(0)). The primary financial metrics influencing risk indicators among deposit money banks in Nigeria are revenue growth, net interest margin, and earnings per share. It was recommended that banks should implement effective risk management systems that can handle increased complexity and scale of operations, and regularly update them, leveraging blockchain technology for decentralized risk management as it relates to revenue growth rate of banks. Maintain a healthy net interest margin through effective risk management practices and internal controls, and utilize this strength to invest in risk mitigation measures, introducing incentive programs to encourage employee involvement in risk management. Conduct regular financial reviews and audits to ensure accurate earnings reporting and risk identification, utilizing AI-powered tools for earnings analysis to identify anomalies and potential risks. Prioritize prudent lending practices and effective risk management to maintain financial stability, implementing dynamic adjustments to the debt-to-equity ratio in response to changes in risk detection needs.
},
 year = {2024}
}

Copy | Download

TY  - JOUR
T1  - Effect of Financial Metrics on Risk Indicators in Nigeria Listed Deposit Money Banks

AU  - Anderson Emmanuel Oriakpono
AU  - Sowunmi Bolanle Musiliu
Y1  - 2024/09/23
PY  - 2024
N1  - https://doi.org/10.11648/j.ijfbr.20241004.12
DO  - 10.11648/j.ijfbr.20241004.12
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 74
EP  - 83
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20241004.12
AB  - This study investigates the effect of financial metrics on risk indicators in Nigerian deposit money banks. The analysis employs yearly time series data spanning from 2007 to 2022, acquired from the Exchange Group PLC. Descriptive statistics, panel unit root tests, Hausman tests, and Panel Ordinary Least Squares (OLS) procedures were used at a 95% confidence interval. The study utilized secondary data sourced from the Exchange Group PLC database. The R-squared (0.564390) and Adjusted R-squared (0.540629) values indicate that the models have strong explanatory power. The results show that all variables are stationary at their levels (I(0)). The primary financial metrics influencing risk indicators among deposit money banks in Nigeria are revenue growth, net interest margin, and earnings per share. It was recommended that banks should implement effective risk management systems that can handle increased complexity and scale of operations, and regularly update them, leveraging blockchain technology for decentralized risk management as it relates to revenue growth rate of banks. Maintain a healthy net interest margin through effective risk management practices and internal controls, and utilize this strength to invest in risk mitigation measures, introducing incentive programs to encourage employee involvement in risk management. Conduct regular financial reviews and audits to ensure accurate earnings reporting and risk identification, utilizing AI-powered tools for earnings analysis to identify anomalies and potential risks. Prioritize prudent lending practices and effective risk management to maintain financial stability, implementing dynamic adjustments to the debt-to-equity ratio in response to changes in risk detection needs.

VL  - 10
IS  - 4
ER  -

Copy | Download

Author Information

Anderson Emmanuel Oriakpono

Department of Taxation and Fiscal Policy, ANAN University, Kwall, Nigeria

Contact Email

http://orcid.org/0009-0004-7454-1640
Sowunmi Bolanle Musiliu

Department of Taxation and Fiscal Policy, ANAN University, Kwall, Nigeria

Contact Email

Download PDF

Sections

Plain Text BibTeX RIS

APA Style

Oriakpono, A. E., Musiliu, S. B. (2024). Effect of Financial Metrics on Risk Indicators in Nigeria Listed Deposit Money Banks. International Journal of Finance and Banking Research, 10(4), 74-83. https://doi.org/10.11648/j.ijfbr.20241004.12

Copy | Download

ACS Style

Oriakpono, A. E.; Musiliu, S. B. Effect of Financial Metrics on Risk Indicators in Nigeria Listed Deposit Money Banks. Int. J. Finance Bank. Res. 2024, 10(4), 74-83. doi: 10.11648/j.ijfbr.20241004.12

Copy | Download

AMA Style

Oriakpono AE, Musiliu SB. Effect of Financial Metrics on Risk Indicators in Nigeria Listed Deposit Money Banks. Int J Finance Bank Res. 2024;10(4):74-83. doi: 10.11648/j.ijfbr.20241004.12

Copy | Download

@article{10.11648/j.ijfbr.20241004.12,
  author = {Anderson Emmanuel Oriakpono and Sowunmi Bolanle Musiliu},
  title = {Effect of Financial Metrics on Risk Indicators in Nigeria Listed Deposit Money Banks
},
  journal = {International Journal of Finance and Banking Research},
  volume = {10},
  number = {4},
  pages = {74-83},
  doi = {10.11648/j.ijfbr.20241004.12},
  url = {https://doi.org/10.11648/j.ijfbr.20241004.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20241004.12},
  abstract = {This study investigates the effect of financial metrics on risk indicators in Nigerian deposit money banks. The analysis employs yearly time series data spanning from 2007 to 2022, acquired from the Exchange Group PLC. Descriptive statistics, panel unit root tests, Hausman tests, and Panel Ordinary Least Squares (OLS) procedures were used at a 95% confidence interval. The study utilized secondary data sourced from the Exchange Group PLC database. The R-squared (0.564390) and Adjusted R-squared (0.540629) values indicate that the models have strong explanatory power. The results show that all variables are stationary at their levels (I(0)). The primary financial metrics influencing risk indicators among deposit money banks in Nigeria are revenue growth, net interest margin, and earnings per share. It was recommended that banks should implement effective risk management systems that can handle increased complexity and scale of operations, and regularly update them, leveraging blockchain technology for decentralized risk management as it relates to revenue growth rate of banks. Maintain a healthy net interest margin through effective risk management practices and internal controls, and utilize this strength to invest in risk mitigation measures, introducing incentive programs to encourage employee involvement in risk management. Conduct regular financial reviews and audits to ensure accurate earnings reporting and risk identification, utilizing AI-powered tools for earnings analysis to identify anomalies and potential risks. Prioritize prudent lending practices and effective risk management to maintain financial stability, implementing dynamic adjustments to the debt-to-equity ratio in response to changes in risk detection needs.
},
 year = {2024}
}

Copy | Download

TY  - JOUR
T1  - Effect of Financial Metrics on Risk Indicators in Nigeria Listed Deposit Money Banks

AU  - Anderson Emmanuel Oriakpono
AU  - Sowunmi Bolanle Musiliu
Y1  - 2024/09/23
PY  - 2024
N1  - https://doi.org/10.11648/j.ijfbr.20241004.12
DO  - 10.11648/j.ijfbr.20241004.12
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 74
EP  - 83
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20241004.12
AB  - This study investigates the effect of financial metrics on risk indicators in Nigerian deposit money banks. The analysis employs yearly time series data spanning from 2007 to 2022, acquired from the Exchange Group PLC. Descriptive statistics, panel unit root tests, Hausman tests, and Panel Ordinary Least Squares (OLS) procedures were used at a 95% confidence interval. The study utilized secondary data sourced from the Exchange Group PLC database. The R-squared (0.564390) and Adjusted R-squared (0.540629) values indicate that the models have strong explanatory power. The results show that all variables are stationary at their levels (I(0)). The primary financial metrics influencing risk indicators among deposit money banks in Nigeria are revenue growth, net interest margin, and earnings per share. It was recommended that banks should implement effective risk management systems that can handle increased complexity and scale of operations, and regularly update them, leveraging blockchain technology for decentralized risk management as it relates to revenue growth rate of banks. Maintain a healthy net interest margin through effective risk management practices and internal controls, and utilize this strength to invest in risk mitigation measures, introducing incentive programs to encourage employee involvement in risk management. Conduct regular financial reviews and audits to ensure accurate earnings reporting and risk identification, utilizing AI-powered tools for earnings analysis to identify anomalies and potential risks. Prioritize prudent lending practices and effective risk management to maintain financial stability, implementing dynamic adjustments to the debt-to-equity ratio in response to changes in risk detection needs.

VL  - 10
IS  - 4
ER  -

Copy | Download