RISK FINANCING AND PERFORMANCE OF SELECTED DEPOSIT MONEY BANKS IN NIGERIA

Yıl 2024, Cilt: 12 Sayı: 2, 196 - 217, 31.12.2024

Musa A. Obalola Fatimo Azeez

https://doi.org/10.18825/iremjournal.1533080

Öz

Business leaders no longer view risks as a mere hazard to be avoided but also as opportunities that should be exploited. Thus, risk itself is not bad, but the bad things are risks that were mismanaged, misunderstood, misplaced, or unintended. This study was carried out to examine the influence of risk financing on the financial performance of banking institutions in Nigeria. Risk financing was examined through the lens of risk transfer proxy as insurance, risk hedging, and risk diversification while performance was measured using profitability (Return on Asset), liquidity (liquidity ratio), and shareholder’s value (Return on Equity). The study adopted an ex post facto research design. The focused on deposit money banks licensed with international authorization by the Central Bank of Nigeria due to their wide range of expertise and experience. These banks are 8 in number and they were all observed in the study. Panel data was drawn from the financial statements of the selected banks for the period of 12 years (2012 – 2022). The Autoregressive Distributive Lag (ADRL) regression analysis was employed to analyze the data after the test for stationarity using the Panel Unit root test methods indicated a mix of stationarity. The study presented a long-run and short-run effect of all three risk financing mechanisms on the financial performance of selected banks in Nigeria. It was observed from the study among others that the risk transfer mechanism using insurance has a negative long-run influence on the financial performance of banks in Nigeria and recommends that alternative means of risk financing should be explored.

Anahtar Kelimeler

Risk Financing, Risk Hedging, Risk Divesification, Risk Transfer, Financial Performance

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