Credit Risk Management and Its Influence on the Financial Performance of Banks: A Study of Selected Banks in Nigeria

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Oyedele Oloruntoba
Adeyemi, Adewumi Zaid
Fasesin, Oladipo Oluwafolakemi

Abstract

This study examines the influence of credit risk management on the performance of Nigerian banks with particular reference to selected banks. Purposive sampling technique was used to select five Nigerian banks. Secondary data was used for this study. It was adopted from the audited financial statements of the listed banks in the Nigerian Stock Exchange (NSE), for the period of the year 2006 – 2017. This study also made use of Nigerian Stock Exchange Fact Book 2017 for the Nigerian banks and CBN bulletin 2017. The method of analysis used descriptive statistics and Linear Regressions. Result reveals that NLPR (β = 0.809), CARR (β = 11.246) and LTDR (β = 6.300) have significant influence on financial performance measured by ROA. Furthermore, the result also shows that CARR (β = 17.982) and LTDR (β = 3.227) have a significant influence on financial performance measured by ROE but NLPR (β = - 1.57) has a negative influence on ROE. The study concludes that credit risk management apparatus employed by the selected banks for the periods of study have a significant influence on their financial performance.

The study, therefore, recommends that regulatory authorises should implement a new code of corporate governance that bank directors with non-performing loans (NPLs) are to either quit or be sacked and also banks' boards to remove any director with insider non-performing loans.

Keywords:
Credit risk management, non-performing loan ratio, capital adequacy ratio, loan-deposit ratio

Article Details

How to Cite
Oloruntoba, O., Zaid, A., & Oluwafolakemi, F. O. (2018). Credit Risk Management and Its Influence on the Financial Performance of Banks: A Study of Selected Banks in Nigeria. South Asian Journal of Social Studies and Economics, 2(2), 1-11. https://doi.org/10.9734/sajsse/2018/v2i225840
Section
Original Research Article