scholarly journals Portfolio Diversification and Performance of Deposit Money Banks: Analysing the Nigerian Banking Industry

2021 ◽  
pp. 12-27
Author(s):  
Ihejirika Peters Omeni ◽  
Aderigha Ades George
Keyword(s):  
Central Bank ◽  
Banking Industry ◽  
Portfolio Diversification ◽  
Foreign Investments ◽  
Treasury Bills ◽  
Return On Equity ◽  
Long Run ◽  
Short Run ◽  
And Performance ◽  
Nigerian Banking

The focus is on Portfolio Diversification and Performance of Deposit Money Banks: analyzing the Nigerian banking industry for the period 1990-2019. The study measured treasury bills, ordinary shares, investments in subsidiaries, and foreign investments outside Nigeria as proxies for Portfolio Diversification while Return on Equity as proxy for performance of deposit money banks for the periods under review. In the course of the study, data were obtained from the website of Central Bank Statistical bulletin and annual report of Nigerian Deposit Insurance Corporation (NDIC). The Augmented Dickey Fuller (ADF) test option was used to test for unit roots. The ARDL and Bounds test were used to estimate the short and long run relationships respectively. The study discovered that at short run, treasury bills, and ordinary shares are negatively related and not significantly related to return on equity while investments in subsidiaries and foreign balances outside Nigeria are positively related to return on equity of DMBs at most lag periods. However, it was further observed that at different lag periods the variables do not significantly predict the direction of return on equity of DMBs. Long run relationship was also observed to exist amid treasury bills, acquisition of ordinary shares, investment in subsidiaries, ,foreign investments outside Nigeria and performance of all deposit money banks in Nigeria for the period 1990 – 2019.at short run, DMBs should diversify into investments in subsidiaries , as this would improve return on equity. Deposit Money Banks should also diversify into foreign holdings that would yield positive net present values. Deposit money Banks in Nigeria should diversify into foreign investments with the right mix   that would increase performance. These were some of the recommendations proffered, to the Government, monetary authorities, Central Bank of Nigeria, researchers and Deposit Money Banks in Nigeria.

scholarly journals Board of Directors Decisions And Performance of Deposit Money Banks: An Analytical Approach

2021 ◽  
Vol 04 (04) ◽  
Author(s):  
Ades George ◽  
Keyword(s):  
Central Bank ◽  
Credit Risk ◽  
Board Of Directors ◽  
Analytical Approach ◽  
Share Capital ◽  
Return On Equity ◽  
Long Run ◽  
Short Run ◽  
And Performance ◽  
Ordinary Share

The study examines the relationship between Board of Directors Decisions and Performance of Deposit Money Banks: An analytical approach in Nigeria for the period 1990–2018. The study measured Ordinary share capital, Debenture, Investment in subsidiaries, and Loans /advances as proxies for Board of Directors decisions while Return on Equity was used as proxies for Performance of deposit money banks for the said periods under review. In the course of the study, data were obtained from the website of Central Bank Statistical bulletin and annual report of Nigerian Deposit Insurance Corporation (NDIC). The Augmented Dickey Fuller (ADF) test option was used to test for unit root. The ARDL and Bounds test were used to estimate the short and long run relationships. This study found that at short run, the board of director’s decisions on financing and investment decisions has positive relationship with return on equity, but are not significant predictors of return on equity. However, at long run the director’s decisions on financing options i.e. ordinary share capital and debenture, investment in subsidiaries and granting of loans have a long run relationship with return on equity of deposit money banks in Nigeria for the period 1990-2018. Strong credit risk administration/procedures should be religiously followed especially (know your customer) and complied with by credit risk managers in all deposit money banks in Nigeria. Ordinary share capital should be a source of financing at the short run. These were some of the recommendations proffered, to the Government, monetary authorities, Central Bank of Nigeria, researchers and Deposit Money Banks in Nigeria.

Criminal Activities and Firms’ Market Power: Evidence from Nigerian Banking Industry

2018 ◽  
Vol 19 (5) ◽  
pp. 1207-1223 ◽  
Author(s):  
Folorunsho M. Ajide ◽  
Olasupo I. Bankefa ◽  
Rufus A. Ajisafe
Keyword(s):  
Decision Making ◽  
Market Power ◽  
Banking Industry ◽  
Capital Requirements ◽  
Relevant Variable ◽  
Long Run ◽  
Short Run ◽  
Bound Test ◽  
Nigerian Banking ◽  
Positive Effect

In this article, we examined the effect of criminal activities on firms’ market power in Nigerian banking industry. Data sourced from Central Bank of Nigeria, National Bureau of Statistics, Nigerian Police force, annual report and accounts of commercial banks in Nigeria were analysed using autoregressive distributed lag-bound test methodology. The study revealed that crime, innovation, market size and capital requirements had negative relationship with firms’ market power in the long run. Criminal activity had no significant effect on firms’ power, while other variables had significant effects on market power. However, in the short run, crime had positive effect on firm’s power, while other variables had negative effect. Meanwhile, all the variables with the exception of innovation had significant effect on firm’s power. The previous period crime rate had significant and positive effect on current period of firm’s market power. This means a firm that employs sophisticated security devices would increase in market share by wooing more customers through deposit safety guaranteed. Consequently, such a firm enjoyed market power in the industry. While, in the long run, the market power disappeared, because most firms would have increased their security level. Henceforth, an attempt to provide for more sophisticated security devices would bring down normal profit in the long run. Therefore, such actions have no value to woo more customers. The study, therefore, concluded that while firms could consider criminal activities as a relevant variable in the short-run decision-making, such a variable becomes irrelevant in the long-run decision-making.

scholarly journals Cross-section instability in financial markets: impatience, extrapolation, and switching

2021 ◽  
Author(s):  
Roberto Dieci ◽  
Xue-Zhong He
Keyword(s):  
Financial Markets ◽  
Cross Section ◽  
Asset Price ◽  
Asset Market ◽  
Long Run ◽  
Short Run ◽  
And Performance ◽  
Equilibrium Market ◽  
High Degree ◽  
Fundamental Price

AbstractThis paper presents a stylized model of interaction among boundedly rational heterogeneous agents in a multi-asset financial market to examine how agents’ impatience, extrapolation, and switching behaviors can affect cross-section market stability. Besides extrapolation and performance based switching between fundamental and extrapolative trading documented in single asset market, we show that a high degree of ‘impatience’ of agents who are ready to switch to more profitable trading strategy in the short run provides a further cross-section destabilizing mechanism. Though the ‘fundamental’ steady-state values, which reflect the standard present-value of the dividends, represent an unbiased equilibrium market outcome in the long run (to a certain extent), the price deviation from the fundamental price in one asset can spill-over to other assets, resulting in cross-section instability. Based on a (Neimark–Sacker) bifurcation analysis, we provide explicit conditions on how agents’ impatience, extrapolation, and switching can destabilize the market and result in a variety of short and long-run patterns for the cross-section asset price dynamics.

Rethinking femininity in organisations: Experimental insights into team composition

2018 ◽  
Vol 26 (5) ◽  
pp. 866-879 ◽  
Author(s):  
Ronald Busse
Keyword(s):  
Sex Role ◽  
Role Expectations ◽  
Curvilinear Relationship ◽  
Sex Role Stereotypes ◽  
Long Run ◽  
Short Run ◽  
And Performance ◽  
State Of Affairs ◽  
Role Incongruity ◽  
Team Types

AbstractRole incongruity, sex role stereotypes and candidate selection procedures which oversatisfy masculine role expectations evoke an underrepresentation of femininity in organisations. The author seeks to remedy this bad state of affairs. This study is designed based on an experiment with 288 young executives simulating self-organised work groups and manipulated the degree of gender-related (not sex-related) heterogeneity. Results generally show a curvilinear relationship with an upright U-shaped format between heterogeneity and performance, team identity and intrateam communication. The major contribution in specific is that highly homogeneous teams outperform other team types in the short run, whereas highly heterogeneous teams succeed in the long run. Consequently, this work recommends ‘femininity enrichment’ in firms and discusses manageable practical advice to do so. As for the laboratory character, findings and implications for practicing managers have to be treated with caution. Finally, the most promising avenues for further research are illuminated.

scholarly journals Effects of Interest Rate on Stock Market Returns in Kenya

2017 ◽  
Vol 9 (8) ◽  
pp. 40
Author(s):  
Donald A. Otieno ◽  
Rose W. Ngugi ◽  
Nelson H. W. Wawire
Keyword(s):  
Interest Rate ◽  
Stock Market ◽  
Granger Causality ◽  
Moving Average ◽  
Market Returns ◽  
Treasury Bills ◽  
Stock Market Returns ◽  
Long Run ◽  
Lending Rate ◽  
Short Run

Debate on the stochastic behaviour of stock market returns, 3-month Treasury Bills rate, lending rate and their cointegrating residuals remains unsettled. This study examines the stochastic properties of the macroeconomic variables, stock market returns and their cointegrating residuals using an Autoregressive Fractionally Integrated Moving Average (ARFIMA) model. It also investigates Granger causality between the two measures of interest rate and stock market returns. The study uses monthly data from 1st January 1993 to 31st December 2015. The results indicate that the 3-month Treasury Bills rate, lending rate and stock market returns are fractionally integrated which implies that shocks to the variables persist but eventually disappear. The results also reveal that the cointegrating residuals are fractionally integrated which suggests that a new and harmful long-run equilibrium might be established when each of the measures of interest rate is driven away from stock market returns. Additionally, the results indicate that the 3-month Treasury Bills rate and lending rate negatively Granger cause stock market returns in the long run. This suggests that stocks and Treasury Bills are competing investment assets. On the other hand, ARFIMA-based Granger causality reveals that stock market returns lead the 3-month Treasury Bills rate and lending rate with a negative sign in the short run. This implies that a prosperous stock market results into a favorable macroeconomic environment. A key contribution of this study is that it is the first to empirically examine fractional cointegration and ARFIMA-based Granger Causality between interest rate and stock market returns in Kenya.

scholarly journals Liquidity Risk and Financial Performance of Commercial Banks in Kenya

2017 ◽  
Vol 9 (3) ◽  
pp. 256 ◽  
Author(s):  
Jane Gathigia Muriithi ◽  
Kennedy Munyua Waweru
Keyword(s):  
Financial Performance ◽  
Commercial Banks ◽  
Generalized Method Of Moments ◽  
Liquidity Risk ◽  
Coefficient Of Determination ◽  
Return On Equity ◽  
Coverage Ratio ◽  
Long Run ◽  
Negative Effect ◽  
Short Run

The focus of this study was to examine the effect of liquidity risk on financial performance of commercial banks in Kenya. The period of interest was between year 2005 and 2014 for all the 43 registered commercial banks in Kenya. Liquidity risk was measured by liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) while financial performance by return on equity (ROE). Data was collected from commercial banks’ financial statements filed with the Central Bank of Kenya. Panel data techniques of random effects estimation and generalized method of moments (GMM) were used to purge time-invariant unobserved firm specific effects and to mitigate potential endogeneity problems. Pairwise correlations between the variables were carried out. Wald and F- tests were used to determine the significance of the regression while the coefficient of determination, within and between, was used to determine how much variation in dependent variable is explained by independent variables. Findings indicate that NSFR is negatively associated with bank profitability both in long run and short run while LCR does not significantly influence the financial performance of commercial banks in Kenya both in long run and short run. However, the overall effect was that liquidity risk has a negative effect on financial performance. It is therefore advisable for a bank’s management to pay the required attention to the liquidity management.

Financial instability, integration and volatility of emerging South Asian stock markets

2017 ◽  
Vol 6 (2) ◽  
pp. 177-190 ◽  
Author(s):  
Rakesh Kumar ◽  
Raj S. Dhankar
Keyword(s):  
Stock Returns ◽  
South Asian ◽  
Stock Markets ◽  
Equity Markets ◽  
International Market ◽  
Portfolio Diversification ◽  
Financial Instability ◽  
Content Type ◽  
Long Run ◽  
Short Run

Purpose The purpose of this paper is to examine the short- and long-run spillover effect of international financial instability on emerging South Asian stock markets. The paper also investigates the financial integration regionally. Design/methodology/approach Granger causality test is used for short-run causal relations. Since results of preliminary test highlight the significant autocorrelations in stock returns, GARCH class models with extreme shocks in international financial market are utilized to test the long-run spillover impact on stock returns. Findings Results indicate significant short- and long-run spillover impacts of international financial instability on the stock returns. They highlight the significant co-integration of South Asian stock markets with the international market. Significant correlations in stock returns and volatility reveal the degree of regional integration to be high between India, Pakistan and Sri Lanka. Research limitations/implications Business, political and market conditions of South Asian stock markets are fundamentally different from each other. These economies were liberalized at different time, which in turn may affect the degree of integration with international equity markets and regionally alike. Practical implications Financial liberalization has linked the South Asian stock markets to the rest of the world. Stock prices move in the same line with the emergence of global expected and unexpected economic shocks. The benefits that arise from the diversification of funds will be eradicated in the long run. Investors with long investment horizons will not actually benefit from portfolio diversification in South Asian equity markets. The Bangladesh stock market does not respond to volatility in international market in the short run and may be a good destination for short-term investment. Originality/value Pioneer efforts are made by utilizing a novel approach with the use of net volatility change in world financial instability for measuring the short- and long-run impacts. Given the emergence of South Asian stock markets, new insights into their vulnerability to world financial shocks provide interesting findings for portfolio diversification.

scholarly journals Corporate governance compliance and its effectiveness in the Nigerian banking industry

2013 ◽  
Vol 10 (3) ◽  
pp. 63-75
Author(s):  
Achuzia Somuawine Azani ◽  
Mei Yu ◽  
Osita Chukwulobelu
Keyword(s):  
Corporate Governance ◽  
Central Bank ◽  
Commercial Banks ◽  
Banking Industry ◽  
Low Frequency ◽  
Independent Directors ◽  
Executive Directors ◽  
Corporate Governance Code ◽  
Compliance Level ◽  
Nigerian Banking

This paper examines the extent of compliance to the Central Bank of Nigeria (CBN) 2006 Corporate Governance Code by 24 Nigerian commercial banks and reveals a compliance level of 76.6%. The major non-compliance areas include non-constitution of a board committee consisting of non-executive directors, that regulates the compensation for executive directors, and the non-inclusion of independent directors on the main boards of many banks. Furthermore, the analysis shows that the benefits resulting from the changes for compliance outweigh the additional layers of supervisory checks and bureaucratic overbearing associated with the Code. The Code has brought about more effective corporate governance, accountability and greater transparency despite a low frequency of supervision and examination of the banks by the CBN.

scholarly journals Cross-Country Stock Market Integration and Portfolio Diversification Opportunities Evidence from Developed, Emerging and Frontier Countries

2020 ◽  
Vol 39 (1) ◽  
Author(s):  
Sultan Salahuddin ◽  
Muhammad Kashif ◽  
Mobeen Ur Rehman
Keyword(s):  
Stock Market ◽  
South Korea ◽  
Market Integration ◽  
Portfolio Diversification ◽  
Stock Market Integration ◽  
Country Level ◽  
Low Correlation ◽  
Long Run ◽  
Short Run ◽  
Cross Country

This study examines the stock market integration in cross-regional countries of developed, emerging, and frontier markets based on low correlation. The objective of the study is to identify the diversification opportunities and link between correlation and integration among country-level stocks. For this purpose, we select 62 countries from all three classifications of developed, emerging, and Frontier Markets. We constructed portfolios by selecting least 5 correlated countries denoted with Pjt in which each country has a correlation of less than .10 with base country Pit. Thirty-two countries fulfill the criteria of low correlation; 7, 13 and 12 from developed, emerging and frontier markets, respectively. Panel co-integration and VECM are applied to test the stock market integration and long & short-run linkages between country-level portfolios designed based on low correlation criteria. After conditioning for oil price movements, S&P 500 and exchange rate, we found Canada, France and Germany from developed category; Chile, Colombia, Greece, South Korea, Malaysia, Pakistan and Philippine from emerging category; and Bahrain, Jordan, Kuwait, Morocco, and Sri Lanka from frontier category have long-run diversification opportunities. Countries including; Canada and Italy from developed category; Argentina, Chile, China, Colombia, India, Indonesia, South Korea, Mexico and the Philippine from emerging category; and Bahrain, Kuwait, Morocco, Nigeria, and Tunisia from emerging category have short-run diversification opportunities.

scholarly journals Response of Deposit Money Banks to Monetary Policy Dynamics in Nigeria

2020 ◽  
Vol 7 (4) ◽  
pp. 33
Author(s):  
Ejem, Chukwu Agwu ◽  
Ogbonna, Udochukwu Godfrey
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Deposit Insurance ◽  
Policy Instruments ◽  
Bank Performance ◽  
Long Run ◽  
Policy Dynamics ◽  
Short Run ◽  
Saving Deposit ◽  
Reserve Ratio

This study examined how banks react to the monetary policies transmission mechanisms of the central bank of Nigeria. The data employed were collected from Nigerian Deposit Insurance Cooperation and Central Bank of Nigeria and subjected to various finametric techniques. The major findings are that cash reserve ratio negatively and significantly affects the performance of deposit money banks in Nigeria, while other monetary policy variables exert insignificantly to the performance of deposit money banks. It was also found that apart from banks own shock; banks respond negatively to shocks from major monetary policy instruments. It was observed that Monetary Policy Rate causes bank performance in both in the short run and long run. While, Cash Reserve Ratio, Liquidity Ratio and Saving Deposit Rate do not cause bank performance in the short run but in the long run. It was also found that monetary policy instruments jointly cause bank performance in the short and long run as opposed by individual instruments in Nigeria. The researchers therefore suggest among others that central bank of Nigeria reduce the cash reserve ratio to enable deposit money banks extend more loans to their potential customers, thereby enhance performance.

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