EFFECT OF RISK COMPONENTS ON OPERATIONAL EFFICIENCY OF DEPOSIT MONEY BANKS IN NIGERIA A STUDY OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

The main objective of this study is to examine effect of risk components on operational efficiency of Deposit Money Banks in Nigeria. The data to be used for the study will be extracted from secondary sources only. The data will be panel data which will be subjected to time and cross-sectional attributes and this will enable us to study innovation and performance of firms over time and as well as across the sampled quoted banks. The findings of the study revealed that credit risk increases the operational efficiency of Deposit money Banks. Also, the study found that liquidity risk has negative and significant effect on operational efficiency. The result also found that capital adequacy has positive and significant effect on operational efficiency. The study recommended that the management of the Deposit Money Banks should device viable measurement for evaluating the risk components confronting the banking operation and not to rely on the bank model with an assumption that that risk is incorporated into bank output without explicitly modeling its role in explaining inefficiency. This is because failure to account for risk-taking may lead to biased estimations of bank efficiency and misleading estimates of scale economies and cost elasticities.