ABSTRACT
The sound financial health of
financial institutions especially banks is often seen as a guarantee not only
to its depositors but also it enhances shareholders wealth, ensures employees’
commitment as well assist in growing the economy. As a sequel to this maxim,
efforts have been made over time by regulatory authorities at ensuring a stable
financial position of bank. It was against this background that this study
evaluates the performance of banks in Nigeria for the period of 2001 to 2010.
The study adopted the ex-post research design and data were collated from
annual statement and accounts of the banks under review. While, Return on Asset
(ROA), Return on Equity (ROE) and Net Interest Margin (NIM) were used as the
dependent variables Shareholders fund was used as the independent variable for
the three hypotheses stated and the Ordinary Least Square (OLS) regression
model was used to test the hypotheses stated. The result showed indicates that
Shareholders’ Fund (SHF) have positive but insignificant impact on Return on
Assets (ROA), Return On Equity (ROA) and Net Interest Margin (NIM) of these
banks. It was therefore concluded from the results that financial structure of
banks in Nigeria does not have significant impact on profitability of banks in
Nigeria. We thus recommend that management of banks in Nigeria should ensure
the utilization of optimal financial structure of their banks as regards the use
of external financing that will enhance profitability of their banks thereby
enhancing shareholders’ wealth maximization.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF STUDY
Performance
failure among Nigerian banks has resulted in loss of public confidence in the
banking sector. Performance links an organization’s goal and objectives with
organization decisions. Public confidence on the banking industry in Nigeria
depends greatly on the profitability of the participating banks in Nigeria.
This explains why the call for the critical assessment of the performance of
the banking system in Nigeria. The efficiency of the banking system has been
one of the major issues, in the new monetary and financial environment of the
world today. The efficiency and competitiveness of financial institutions
cannot easily be measured, since their products and services are of an
intangible nature. Many researchers had attempted to measure the productivity
and efficiency of the banking industry using outputs, size, costs, efficiency
and performance. This is because the scale and scope of economies of banking
have been one of the issues relating to the competitiveness, efficiency and
survival. The outcome of this issue of performance is the existence of many
reforms aimed at reorienting, repositioning and revitalizing an existing status
quo bedecked with bottlenecks that inhibits against institutional smooth
running and growth. The dynamic nature and
Apart from rigid regulations
guiding entry into the banking system, Government all over the world through
the central bank influences monetary policy and the operations of the banking
system which is known to impact remarkably on the economy. Thus, the monetary
policy transmission mechanism and economic growth mechanism permeate through
the banking sector. In the light of the role of banks in the financial
landscape, it becomes imperative that technical and
Therefore, there was need for
regulations and reforms to ensure stability in banking system. Giddy (1984) and
Sheng (1999) provide four major reasons why banks should be regulated. The
first relates to monetary policy – the ability of banks to create money.
Second, as channels of credit or investments, banks are involved in credit
allocation. Third, banks are regulated to ensure healthy competition and
innovation by preventing the formation of cartels. The fourth is for prudential
regulation reasons and to mitigate the problem of information. This view is
supported by Howells and Bain (2004) who stated that the reason for bank
regulation originates from the existence of asymmetric information – the fact
that customers of the institutions (banks) are less informed and thus more at a
disadvantage about the affairs of the banks and not the banks as perceived by
opinions. This justified the fact that reforms in the banking sector are necessary
to ensure the safety of depositors’ money, deepen the financial system for
soundness and efficiency of the system in order to engender growth of the
economy. Okpara (2011) observed that a feeble banking system is repressive,
discretionary and discounts the intermediation process thereby precipitating
macroeconomic instability. Therefore to ensure normalcy in any financial
economy, reforms are necessary.....
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Item Type: Postgraduate Material | Attribute: 97 pages | Chapters: 1-5
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