EFFECTS OF FIRM ATTRIBUTES ON LOAN PORTFOLIO QUALITY OF LISTED DEPOSIT MONEY BANKS IN NIGERIA (2007-2018)

Abstract

The financial stability of the Banking system of every
economy depends in no small extent on the quality of the
loan portfolio in the system. Firm attributes have,
however, been identified by scholars as one of the
significant determinants of the quality of loan portfolio in
the banking industry. This study examines the effect of
firm attributes on loan portfolio quality of listed Deposit
Money Banks in Nigeria to ascertain the extent to which
specific attributes influenced the quality of their loan
portfolio. The study adopts ex-post facto research design.
The population of this study is made up of fourteen (14)
listed Deposit Money Banks on the floor of the Nigerian
Stock Exchange. The study employed census sampling
technique. The study utilizes secondary methods in
carrying out its investigation. The data was obtained from
annual audited accounts and financial reports of listed
deposit money banks. This study used the panel ordinary
ILIMI JOURNAL OF ARTS AND SOCIAL SCIENCES (IJASS) Volume 4 No.1, November/December, 2019.
Effects of Firm Attributes on Loan Portfolio Quality of Listed Deposit
Money Banks in Nigeria (2007-2018)
137
least squares model as the tool of analysis. The study
found that the capital adequacy ratio has a negative and
significant effect on non-performing loan ratio. The study
also revealed that liquidity ratio and bank size have no
considerable impact on non-performing loan ratio of
listed DMBs in Nigeria. Based on the findings, the study
concludes that the loan portfolio quality of listed DMBs
in Nigeria is determined by firm-specific variables such
as capital adequacy, liquidity and bank size. The study
recommends that banks should ensure that customers are
adequately screened to eliminate those who cannot repay
the loans. Likewise, the research suggests that banks
should identify the optimal level of liquidity to minimize
the negative effects on the non-performing loan
associated with holding a high level of liquid assets.
Equally, the study recommends that banks should
increase the amount of capital adequacy ratio since the
measure of capital adequacy showed that banks with high
capital adequacy ratios perform better in terms of nonperforming loan. Lastly, the study recommended that
banks should maintain assets of high quality as this has a
negative effect on non-performing loan.