EFFECT OF RISK MANAGEMENT ON PROFITABILITY OF DEPOSIT MONEY BANKS INNIGERIA

Abstract

This study examines the effect of risk management on the profitability of deposit money banks in Nigeria, drawing data from five selected deposit money banks quoted on the Nigerian Stock Exchange. The study utilized secondary data obtained from audited annual reports covering an eight-year accounting period from 2016 to 2023 and using four independent variables (LIQSK, CRISK, CARSK, and OPRSK). An ex-post facto research design was employed, and the Purposive sampling technique was used to obtain a sample size of five (5) banks.  The data was analyzed using the ordinary least squares regression technique at   1%  level of significance. The result of the analysis showed that Liquidity risk has a positive and significant effect on return on assets of selected deposit money banks in Nigeria (t-value = 9.801, p-value <0.01); Credit risk has negative and significant effect on return on assets of selected money deposit banks in Nigeria (t-value = -9.50, p-value < 0.01); capital adequacy risk has positive and significant effect on return on assets of money deposit banks in Nigeria  (t-value  =10.93, p-value <0.01);  Operational risk has positive and significant effect on return on assets of selected money deposit banks in Nigeria (t-value = 9.517, p-value <0.01);. Based on the findings, the study therefore concludes that risk management has a significant effect on the profitability of deposit money banks in Nigeria. The study recommends that the regulatory agencies responsible for maintaining financial reporting quality, like the SEC, CBN, and FRC, should devise a means of monitoring financial statements of reporting organizations (banks in particular) annually.