FINANCIAL RISK MANAGEMENT AND FINANCIAL PERFORMANCE OF LISTED DEPOSIT MONEY BANKS (DMBS) IN NIGERIA

Abstract

The study examined the effect of financial risk management on the financial performance of listed Deposit Money Banks (DMBs) in Nigeria, focusing on the period from 2014 to 2023. The research adopts a positivist philosophy and used an Ex-Post-Facto research design. Data was extracted from the published annual reports of 14 listed DMBs on the Nigerian Exchange Group (NGX), with a final sample size of Nine (9) banks selected through purposive sampling. The study employed Descriptive Analysis, Unit Root Tests, Panel ARDL Model and Moderated Multiple Regression Technique (MMR) for data analysis, utilizing E-Views Version 10 and SPSS Version 23 for statistical analysis. The results revealed that credit risk management has a significant effect on return on assets (ROA) in the long run, but no significant effect in the short run. Operational risk management, on the other hand, significantly influences both return on assets (ROA) and earnings per share (EPS) in both the short and long run. Additionally, the risk committee has an insignificant moderating effect on the relationship between financial risk management and both ROA and EPS. The study concluded that financial risk management positively influences financial performance in the long run, but its effect is statistically insignificant in the short run. Based on the findings, it was recommended amongst others that banks should prioritize operational risk management strategies for improved performance and consider revising their risk management frameworks to enhance their long-term stability. The study also recommended further exploration of the role of risk committees in moderating the relationship between financial risk management and performance. The study adds to the literature on financial risk management in emerging markets by providing insights into how different dimensions of risk management impact the financial performance of Nigerian banks. It highlights the importance of long-term risk management strategies and emphasizes the need for further research on the role of corporate governance, specifically risk committees, in shaping financial outcomes. The study also provides empirical evidence for policymakers and banking sector stakeholders, offering practical implications for improving financial risk management practices in Nigeria.