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Empirical Assessment on Financial Regulations and Banking Sector Performance

Author

Listed:
  • Igbinosa, S.

    (Department of Banking and Finance, Faculty of Management Sciences, University of Benin, Nigeria)

  • Sunday Ogbeide

    (Department of Accounting and Finance, Faculty of Social and Management Sciences, Elizade University, Ilara- Mokin, Ondo State, Nigeria)

  • Babatunde Akanji

    (Department of Human Resources Management, Faculty of Social and Management Sciences, Elizade University, Ilara- Mokin, Ondo State, Nigeria)

Abstract

This study examines financial regulation and banking sector performance in Nigeria. Specifically, the study determines the impact of reforms on banking sector performance and also assesses the nexus between capital adequacy and banking sector performance. Time series data for the period 1993 to 2014 was used. As an analytical tool, the study uses unit root test to determine the stationary state of the variables. We also employed the Johansson co-integration and error correction model (ECM) statistical techniques to establish both short-run and long-run dynamic relationships between the endogenous and exogenous variables. The empirical findings indicate that financial regulation significantly impacts the banking sector performance while financial regulation has both short-run and long-run dynamic relationships with the banking sector performance in Nigeria. It was found that the four-period lag of capital adequacy negatively affects banking sector performance and is not statistically significant. The paper suggests that the Central Bank of Nigeria (CBN) should continually make public the impacts that the various financial regulations and reforms have on the performance of Nigerian banks. Majority of the policies on financial regulation by the apex bank (CBN) need to be long-run which can enable confidence of stakeholders, shareholders and the general public in the Nigerian banking industry when critically evaluated.

Suggested Citation

  • Igbinosa, S. & Sunday Ogbeide & Babatunde Akanji, 2017. "Empirical Assessment on Financial Regulations and Banking Sector Performance," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 6(3), pages 143-155.
    • Handle: RePEc:cbk:journl:v:6:y:2017:i:3:p:143-155
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    Citations

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    Cited by:

    1. Abiloro, T. O & Ilugbami, J. O., 2023. "Regulatory Institutions and National Economic Development in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(5), pages 1552-1575, May.
    2. Bouteska, Ahmed & Büyükoğlu, Burak & Ekşi, Ibrahim Halil, 2023. "How effective are banking regulations on banking performance and risk? Evidence from selected European countries," Finance Research Letters, Elsevier, vol. 53(C).

    More about this item

    Keywords

    Financial regulations; capital adequacy; bank size; monetary policy rate; reform; performance.;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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