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Liquidity Management and Performance of Deposit Money Banks in Nigeria (1986 – 2011): An Investigation

Received: 15 October 2016     Accepted: 20 December 2016     Published: 28 April 2017
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Abstract

Liquidity and bank performance are key factors in determining the survival, growth, sustainability and performance of a banking system. Mistakes in liquidity planning and implementation can affect banking operations and might exhibit long term effect on the economy. The main aim of this study is to find empirical evidence of the impact of liquidity management on the performance of deposit money banks. 24 banks were surveyed which constitute the entire deposit money banking industry in Nigeria between 1986 and 2011. Secondary data were collected and analysed using SPSS. The study uses descriptive, correlations and inferential statistics. Bank performance in terms of profitability is measured by its return on equity. Three hypotheses are formulated and statistically tested at 5 per cent level of significance using Multiple Linear Regression Analysis. Findings from the empirical analysis show that there is a significant relationship between liquidity management and the performance of Deposit Money Banks in Nigeria. The correlation results reveal positive impacts between return on equity and liquidity management variables: liquidity and cash reserve ratios, whereas loan to deposit ratio shows negative impact. However, the key results indicate that only the banks with optimum liquidity were able to maximize returns. The study concludes that illiquidity and excess liquidity pose problem to bank management operations and recommends that bank should adopt optimum liquidity model for efficiency and effectiveness.

Published in International Journal of Economics, Finance and Management Sciences (Volume 5, Issue 3)
DOI 10.11648/j.ijefm.20170503.13
Page(s) 146-161
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2017. Published by Science Publishing Group

Keywords

Liquidity, Management, Performance, Deposit Money Banks

References
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  • APA Style

    Daniel Bassey Edem. (2017). Liquidity Management and Performance of Deposit Money Banks in Nigeria (1986 – 2011): An Investigation. International Journal of Economics, Finance and Management Sciences, 5(3), 146-161. https://doi.org/10.11648/j.ijefm.20170503.13

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    ACS Style

    Daniel Bassey Edem. Liquidity Management and Performance of Deposit Money Banks in Nigeria (1986 – 2011): An Investigation. Int. J. Econ. Finance Manag. Sci. 2017, 5(3), 146-161. doi: 10.11648/j.ijefm.20170503.13

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    AMA Style

    Daniel Bassey Edem. Liquidity Management and Performance of Deposit Money Banks in Nigeria (1986 – 2011): An Investigation. Int J Econ Finance Manag Sci. 2017;5(3):146-161. doi: 10.11648/j.ijefm.20170503.13

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  • @article{10.11648/j.ijefm.20170503.13,
      author = {Daniel Bassey Edem},
      title = {Liquidity Management and Performance of Deposit Money Banks in Nigeria (1986 – 2011): An Investigation},
      journal = {International Journal of Economics, Finance and Management Sciences},
      volume = {5},
      number = {3},
      pages = {146-161},
      doi = {10.11648/j.ijefm.20170503.13},
      url = {https://doi.org/10.11648/j.ijefm.20170503.13},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20170503.13},
      abstract = {Liquidity and bank performance are key factors in determining the survival, growth, sustainability and performance of a banking system. Mistakes in liquidity planning and implementation can affect banking operations and might exhibit long term effect on the economy. The main aim of this study is to find empirical evidence of the impact of liquidity management on the performance of deposit money banks. 24 banks were surveyed which constitute the entire deposit money banking industry in Nigeria between 1986 and 2011. Secondary data were collected and analysed using SPSS. The study uses descriptive, correlations and inferential statistics. Bank performance in terms of profitability is measured by its return on equity. Three hypotheses are formulated and statistically tested at 5 per cent level of significance using Multiple Linear Regression Analysis. Findings from the empirical analysis show that there is a significant relationship between liquidity management and the performance of Deposit Money Banks in Nigeria. The correlation results reveal positive impacts between return on equity and liquidity management variables: liquidity and cash reserve ratios, whereas loan to deposit ratio shows negative impact. However, the key results indicate that only the banks with optimum liquidity were able to maximize returns. The study concludes that illiquidity and excess liquidity pose problem to bank management operations and recommends that bank should adopt optimum liquidity model for efficiency and effectiveness.},
     year = {2017}
    }
    

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    T1  - Liquidity Management and Performance of Deposit Money Banks in Nigeria (1986 – 2011): An Investigation
    AU  - Daniel Bassey Edem
    Y1  - 2017/04/28
    PY  - 2017
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    DO  - 10.11648/j.ijefm.20170503.13
    T2  - International Journal of Economics, Finance and Management Sciences
    JF  - International Journal of Economics, Finance and Management Sciences
    JO  - International Journal of Economics, Finance and Management Sciences
    SP  - 146
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    PB  - Science Publishing Group
    SN  - 2326-9561
    UR  - https://doi.org/10.11648/j.ijefm.20170503.13
    AB  - Liquidity and bank performance are key factors in determining the survival, growth, sustainability and performance of a banking system. Mistakes in liquidity planning and implementation can affect banking operations and might exhibit long term effect on the economy. The main aim of this study is to find empirical evidence of the impact of liquidity management on the performance of deposit money banks. 24 banks were surveyed which constitute the entire deposit money banking industry in Nigeria between 1986 and 2011. Secondary data were collected and analysed using SPSS. The study uses descriptive, correlations and inferential statistics. Bank performance in terms of profitability is measured by its return on equity. Three hypotheses are formulated and statistically tested at 5 per cent level of significance using Multiple Linear Regression Analysis. Findings from the empirical analysis show that there is a significant relationship between liquidity management and the performance of Deposit Money Banks in Nigeria. The correlation results reveal positive impacts between return on equity and liquidity management variables: liquidity and cash reserve ratios, whereas loan to deposit ratio shows negative impact. However, the key results indicate that only the banks with optimum liquidity were able to maximize returns. The study concludes that illiquidity and excess liquidity pose problem to bank management operations and recommends that bank should adopt optimum liquidity model for efficiency and effectiveness.
    VL  - 5
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    ER  - 

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Author Information
  • Department of Business Administration, Faculty of Management Sciences, Cross River University of Technology, Calabar, Nigeria

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