Effect of Firm Risks and Risk Management Committee on the Performance of Listed Deposit Money Banks in Nigeria (2012-2019)

Abstract

An evaluation into the causes of increasing failure of banks operating in Nigeria revealed that inability of institutions to proactively manage the inherent risks related to business operations were the key causes. This study examined the effect of firms’ risk and performance of banks in Nigeria. The study adopted longitudinal research methodology in investigating the effect of firm risk determinants measured by credit risk, liquidity risk, operational risk, solvency risk, capital adequacy risk, market risk, foreign exchange risk; and risk management committee on the banks’ performance. Secondary data obtained from the annual financial statements of the firms for the periods of 2012-2019 were used in the analysis. The study utilized panel data regression model to estimate the direct and moderating relationship. Findings from the analysis revealed the existence of positive significant effects of solvency risk, capital adequacy risk, market risk; and risk management committee on performance. The study also revealed the existence of positive insignificant effect of credit risk, liquidity risk and foreign exchange risk on performance; while significant negative effect of operational risk on performance was revealed. It was also established that recession periods have both positive and negative influence in the relationship between firms risk and performance of banks in Nigeria. In the overall, the study concluded that firms’ risks determinants have significant effect on the performance of banks in Nigeria. Therefore, the study recommends that the apex regulators should re-assure that the financial service firms should be committed to setting all risk management policies and programs.