Empirical examination of the impact of risk management on financial performance of listed deposit money banks in Nigeria

Abstract

This study examined the impact of risk management on financial profitability of listed banks in Nigeria covering a scope of five (5) years from 2018 to 2022. Risks asset management in banks has over the years affected their financial profitability; to an extent that it has threatens their going concern. Risks management was proxied by credit risk, liquidity risk and operational risk whereas, financial profitability was proxied by return on assets (ROA) of the Deposit Money Banks (DMBs). Ex-post factor was used as the research design for the study while quantitative data was collected from the secondary sources through the audited financial reports and accounts of the listed banks. Three different tools were employed in the analysis of data. Thus; descriptive statistics which tests the quality, nature and magnitude of the variables employed in the study. Correlation matrix was employed to determine the level of association between the outcome and the explanatory variables individually and cumulatively and multiple regression was utilized in testing the impact of risk management on financial profitability of listed banks in Nigeria. The findings from the study revealed that credit risk and liquidity risk jointly have positive significant impact on financial profitability of banks in Nigeria. Operational risk on the other hand, was found to be statistically, positively but insignificantly impacting on financial profitability of DMBs in Nigeria. Based on the findings, it was concluded that credit risk and liquidity risk have significant influence
on financial profitability of listed DMBs in Nigeria. Therefore, it is necessary and desirable for the management of the listed DMBs in Nigeria to deploy cost-benefit strategies designed at for relevant and efficient management of risks with a view to ensuring that their financial profitability is not adversely affected.