<abstract xmlns="http://www.w3.org/1999/xhtml"><p>This study examines the impact of bank capital and operating efficiency on the Nigerian deposit money bank financial performance with a view to resolving risk-based and non-risk-based capitals’ dichotomy existing in the bank literature. Using bank-specific data obtained from the annual reports and accounts of 15 banks listed on the Nigerian Stock Exchange between 2012 and 2015, the panel data regression analyses revealed the superiority of standard capital ratio of equity-to-total-assets, a non-risk-based capital, over other measures. While all measures, both risk-based and non-risk-based capitals, showed significantly positive effects on bank performance as measured by return-on-asset, mixed results were obtained from other indicators: return-on-equity and net-interest-margin. Overall, only equity-to-total-assets influenced all adopted performance indicators positively. It was also found that operating efficiency measured by cost-to-income ratio had negative impact on bank performance, but on the average it appeared too high. Thus, incorporating the standard capital ratio of equity-to-total assets into regulatory regime by the banks’ regulator is recommended to ensure its relevance is not overshadowed.</p></abstract>

This study examines the impact of bank capital and operating efficiency on the Nigerian deposit money bank financial performance with a view to resolving risk-based and non-risk-based capitals’ dichotomy existing in the bank literature. Using bank-specific data obtained from the annual reports and accounts of 15 banks listed on the Nigerian Stock Exchange between 2012 and 2015, the panel data regression analyses revealed the superiority of standard capital ratio of equity-to-total-assets, a non-risk-based capital, over other measures. While all measures, both risk-based and non-risk-based capitals, showed significantly positive effects on bank performance as measured by return-on-asset, mixed results were obtained from other indicators: return-on-equity and net-interest-margin. Overall, only equity-to-total-assets influenced all adopted performance indicators positively. It was also found that operating efficiency measured by cost-to-income ratio had negative impact on bank performance, but on the average it appeared too high. Thus, incorporating the standard capital ratio of equity-to-total assets into regulatory regime by the banks’ regulator is recommended to ensure its relevance is not overshadowed.

Bank Capital, Operating Efficiency, and Corporate Performance in Nigeria

Acta Universitatis Sapientiae, Economics and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

{"article-title":"Bank Capital, Operating Efficiency, and Corporate Performance in Nigeria"}

This study examines the impact of bank capital and operating efficiency on the Nigerian deposit money bank financial performance with a view to resolving...

Bank Capital, Operating Efficiency, and Corporate Performance in Nigeria

Published Online: Mar 04, 2019

Page range: 61 - 87

DOI: https://doi.org/10.1515/eb-2018-0004

Keywords
risk-based capital, non-risk-based capital, cost-to-income ratio, deposit money banks, Nigeria

© 2018 Abdulai Agbaje Salami et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Bank Capital, Operating Efficiency, and Corporate Performance in Nigeria

Published Online: Mar 04, 2019

Page range: 61 - 87

DOI: https://doi.org/10.1515/eb-2018-0004

Keywordsrisk-based capital, non-risk-based capital, cost-to-income ratio, deposit money banks, Nigeria

© 2018 Abdulai Agbaje Salami et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
risk-based capital, non-risk-based capital, cost-to-income ratio, deposit money banks, Nigeria