THE EFFECTS OF CREDIT RISK ON THE FINANCIAL PERFORMANCE OF QUOTED DEPOSIT MONEY BANKS
Abstract
The business of banking comes with a risk of default from borrowers, which would consequently affect the performance of these banks. As the banking sector plays a vital part in the economic and financial development of any country, it is essential to establish the effect credit risk has on the financial performance of quoted deposit money banks in Nigeria. The general objective of the study is to examine the effect of credit risk on financial performance, three (3) specific objectives and hypotheses were postulated to test the relationship between the variables of the study. Data was collected from audited financial reports of five first tier banks listed banks and data analysis was conducted using descriptive statistics, correlation analysis and panel regression analysis. Findings from the study revealed that non-performing loans and impairment loan charge-off had negative and significant effect on the financial performance of listed banks, while capital adequacy had a positive but inconsequential effect on the financial performance of listed banks. The study therefore, recommends that banks should be more critical with assessment of loans and bring up to date their terms and conditions to reflect new realities that can increase their nonperforming loans.
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