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Bank-Specific Variables and Banks’ Financial Soundness: Empirical Evidence from Nigeria

Author

Listed:
  • Salami Abdulai Agbaje

    (Department of Accounting, Al-Hikmah University Ilorin, Nigeria. Postal Add: P.M.B. 1601, Ilorin, Kwara State, Nigeria; Phone: +2348064386468)

  • Uthman Ahmad Bukola

    (Ahmad Bukola Uthman is at Department of Accounting, Al-Hikmah University, Ilorin, Nigeria.)

  • Sanni Mubaraq

    (Mubaraq Sanni is at Department of Accounting and Finance, Kwara State University, Malete, Ilorin, Nigeria.)

Abstract

This study examines the explanatory power of capital adequacy, asset quality, management soundness, earnings quality, liquidity and sensitivity to market risk (CAMELS) framework as well as a number of other variables on the financial soundness (measured by regulatory capital adequacy ratios) of banks in Nigeria. The findings, using ordinary least squared (OLS) regression subsequent to the establishment of no panel effects among the sampled banks, reveal the significant explanatory potentials of these bank-specific variables though some give a reversal of their prior expectations. Apart from reawakening the investors’ and depositors’ interest, the findings further have policy implications on the regulation and operation of these financial institutions. The study breaks new grounds in the measurement of capital adequacy using gross revenue ratio and leverage ratio, asset quality using income statement impairment charges for loan losses, and in the inclusion of the sensitivity to market risk most especially in the Nigerian context.

Suggested Citation

  • Salami Abdulai Agbaje & Uthman Ahmad Bukola & Sanni Mubaraq, 2021. "Bank-Specific Variables and Banks’ Financial Soundness: Empirical Evidence from Nigeria," Zagreb International Review of Economics and Business, Sciendo, vol. 24(1), pages 37-66.
    • Handle: RePEc:vrs:zirebs:v:24:y:2021:i:1:p:37-66:n:1003
    DOI: 10.2478/zireb-2021-0003
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    More about this item

    Keywords

    CAMELS Framework; Capital Adequacy Ratio; Charter Value Theory; Deposit Money Bank; Nigeria;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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