Capital Structure, Asset Liquidity and Financial Performance of Listed Deposit Money Banks in Nigeria

Abstract

This study examined capital structure, liquidity and financial performance of listed deposit money banks in Nigeria. The study specifically investigated the relationship between debt-to-equity ratio and financial performance of listed deposit money banks in Nigeria, the effect of total debt ratio on the financial performance of listed deposit money banks in Nigeria and how asset liquidity influences financial performance of listed deposit money banks in Nigeria. The study adopted the ex-post facto research design. The data for this study were obtained from secondary source that was derived from financial statements of selected deposit money banks listed on the Nigerian Exchange. The data covered the period 2011–2020. Descriptive and inferential statistical methods were employed in analyzing the data gathered. The findings of the OLS regression analysis revealed that debt equity ratio (DER) has significant negative impact on financial performance. However, findings revealed that total debt to total asset ratio (TTR) has a significant and positive impact on the financial performance, while asset liquidity (ASL) has a negative and significant impact on financial performance of the sampled banks in Nigeria. It is concluded that the variables of capital structure as used in the study, such as debt to equity ratio, total debt to total asset ratio, and asset liquidity, have mixed results of positive and negative effects on financial performance of deposit money banks in Nigeria.