CAPITAL ADEQUACY AND DEPOSIT MONEY BANK'S RETURN ON ASSET (ROA) IN NIGERIA
This study investigated capital adequacy and Deposit Money Bank's (DMB) Return on Asset (ROA) in Nigeria in which the effect of capital to asset ratio on bank's profit margin and the relationship between solvency and asset turnover was examined. The study population of the study comprised Nigeria deposit money banks listed on the floor of Nigeria Stock Exchange as at 2021. Sample of bank selected was Zenith Plc, Guaranty Trust Bank Plc (GTB), First Bank Nigeria Limited, Access Bank Plc, and United Bank for Africa Plc based on global ranking order and the fact that they are listed on Nigeria Stock Exchange. To determine the effect of capital adequacy on banks performance, Ordinary Least Square (OLS) regression model was employed the data collected within the period of 2006-2020. The findings of this study revealed coefficient of 0.080034 implies 1% change in capital to asset ratio would lead to 8% increase change in profit margin ratio and p-value of 0.042223 shows that CTA has statistical significant effect on profit margin of the selected banks within the period under study; coefficient of 0.04587 implies 1% change in solvency would lead to 4.58% change in asset turnover of the selected DMBs under the period studied, p-value of 0.0000611 shows that SOLV has statistical significant relationship with ATU of the selected banks within the period under study. The study recommends bank decision makers should give consideration for its solvency status and capital to asset ratio when investigating factors affecting bank’s actualization objective. In addition, DMBs in Nigeria should ensure that they maintain above minimum capital to asset ratio level in order to guarantee an efficient profit margin. Also, the ability of DMBs to meet their short and medium term financial obligations must be fortified in order to keep the performance at per.
Keywords: Capital Adequacy, Return on Asset, Capital to Asset Ratio, Solvency, Profit Margin and Asset Turnover.
Copyright (c) 2022 Adeoti , Bankole Isaac Akinroluyo,
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.Fair East Publishing has chosen to apply for the Creative Common Attribution Noncommercial 4.0 Licence (CC BY) license on our published work. Authors who wish to publish their manuscript in our journal agree on the following terms:
1. Authors retain the copyright and grant us (Fair East Publishing and its subsidiary journals) the right for first publication with the work licensed under a Creative Commons Attribution (CC BY) License which permits others to share the work with an acknowledgment of the work’s authorship and initial publication in this journal. Under this license, author retains the ownership of the copyright of their content, but anyone is allowed to download, reuse, reprint, modify, distribute, and/or copy the contents as long as the original authors and source are cited. No permission is required from the publishers or authors.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal’s published version of the work (for example, publishing it as a book or submitting it to an institutional repository), with an acknowledgment of its initial publication in Fair East Publishing owned journals.
3. We encourage our authors/contributors to post their work online (such as posting it on their website or some institutional repositories) prior to and during the submission process since it produces scholarly exchange and greater and earlier citation of published work.