Credit Risk and Shareholders’ Value in Nigerian Deposit Money Banks
Journal Title: IOSR journal of Business and Management - Year 2018, Vol 20, Issue 7
Abstract
Banks have been known for their role of financial intermediation and by this function exposed to credit risk. A sound credit risk decision by banks is very vital as it enhances earnings as well as increases shareholders’ wealth. This study examines the effect of credit risk on shareholders’ value in Nigeria Deposit Money Bank. Data were sourced from audited annual report of the nine (9) banks sampled for a period of thirteen (13) years from 2004 to 2016. A panel multiple regression technique of data analysis was applied using the Generalized Least Square (GLS) estimators. The GLS model regressed the predictor variables of nonperforming loans (NPL), loan loss provisions (LLP), and capital adequacy (CAR) on market capitalization while controlling for bank size. The result shows that credit risk has a significant effect on shareholders' value of Deposit Money Banks in Nigeria. Non-performing loans and loan loss provision reveal a negative significant effect of shareholders’ value, implying that increase in Non-performing loans and loan loss provision will reduce shareholders' value. Hence, the study recommends that Deposit Money Banks in Nigeria should redefine and restructure their credit products and also formulate credit policies that will ensure operational consistency as well as curtail lending that could lead to losses.
Authors and Affiliations
Dauda Isuwa, Nyor Terzungwe
Keywords
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- EP ID EP412079
- DOI 10.9790/487X-2007013646.
- Views 54
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