Research Purpose: This study investigates how financial metrics affect the return on assets (ROA) of Nigerian deposit money institutions. Specifically, it aims to:
Methodology: The study employs an ex-post-facto research design, utilising secondary data from the financial statements of Nigerian deposit money banks. A model incorporating descriptive coefficients, multiple linear regression analysis, panel data time series, and cross-sectional data was used to assess the extent to which the tested variables influenced ROA. The analysis was conducted using regression techniques.
Findings: The results indicated that the liquidity ratio, cash reserve ratio, and loan-to-deposit ratio each had a positive but non-significant effect on the ROA of Nigerian deposit money banks:
Additionally, the liquidity ratio had a negative and non-significant effect on ROA (-0.007557; p-value = 0.5072 > 0.05).
Conclusion: The findings suggest that while the financial metrics examined have positive associations with the ROA of deposit money banks in Nigeria, these effects are not statistically significant.
Recommendations: It is recommended that banks develop prudent strategies for managing their cash reserves, considering the risk-return trade-off when managing loan portfolios. Furthermore, banks should ensure that their liquidity is appropriately managed to enhance overall financial performance.
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