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LIQUIDITY MANAGEMENT AND FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA
Abstract
This study investigated the Impact of Liquidity Management on the Financial Performance of Deposit Money Banks in Nigeria for a period of 10 years from 2011 to 2020. The study used secondary data collected from the annual reports of deposit money banks listed on the Nigerian Stock Exchange.The study used return on asset, return on equity and net profit margin to measure financial performance. Liquidity ratio, loan to deposit ratio, cash reserve ratio and deposit rate were used as proxies for liquidity management. The research population was all the 22 licensed deposit money banks in Nigeria, out of which a sample size of seven deposit money banks were chosen using purposive sampling. The study adopted ex post facto research design. Panel least Square Regression Technique was employed to discover the relationship between the variables. The findings show that liquidity management has a positive and significant effect on the financial performance of deposit money banks in Nigeria. The study recommended that all banks should maintain reasonable proportion of their assets in liquid form as this has implication on performance and as well work towards improving their overall state of liquidity so as to have favorable returns on performance and also, they are to work towards improving their overall state of liquidity so as to have favorable returns on performance.
Keywords: Financial Performance, Liquidity, Liquidity Ratio, Return on Asset, Return on Equity.