Effect Of Statutory Reserve and Bank Branches on Revenue Reserves of Deposit Money Banks in Nigeria

Abstract

The study examined the effect of statutory reserves and bank branches on the revenue reserves of deposit money banks in Nigeria. Retained earnings were the dependent variable. The study adopted an ex-post-facto research design, covering the period between 2010 and 2019. Secondary data were extracted from the annual reports and accounts of sampled deposit money banks in Nigeria. Multiple regression analysis was used for the test of hypotheses. The study of the regression analysis revealed that statutory reserves have a significant and negative effect on the revenue reserve of deposit money banks in Nigeria. Furthermore, the number of branches of deposit money banks had no significant effect on their revenue reserves. The findings imply that statutory reserves can be used to predict and make decisions on retained earnings of deposit money banks in Nigeria. The study, therefore, recommends that banks focus on working on technicalities that will enable them to reduce their statutory reserve. However, the CBN should give the banks more freedom to have in-house retention than reserving with the CBN. This is because when it is reduced, there will be more loanable funds at the disposal of deposit money banks, and their profitability chances increase as well. Also, the insignificant effect of the number of branches indicates that the firms should not see an increase in the number of their branches as the solution to higher revenue reserves