European Journal of Accounting, Finance and Investment

Risk Management And Firm Value Of Deposit Money Banks In Nigeria

Ajakpo Vivian Chioma (Anetoh) Ph.D

Department of Accountancy, Anambra State Polytechnic Mgbakwu, Anambra State, Nigeria

Udeachu Peter Izuchukwu

Bursary Department, Anambra State Polytechnic Mgbakwu, Anambra State of Nigeria

Ezekwonna Chinedu Emeka

Bursary Department, Anambra State Polytechnic Mgbakwu, Anambra State of Nigeria.

Keywords: Risk Management, Firm Value, Deposit Money Banks, PLS-SEM, Nigeria.

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Abstract

This research work investigated risk management and firm value of listed deposit money banks in Nigeria. The specific objectives of the study were to investigate the effect of credit risk, liquidity risk, operational risk, capital adequacy risk and market risk on firm value of listed deposit money banks in Nigeria. The study adopted an ex-post facto research design method. The target population of the study was all the deposit money banks while only those listed in Nigeria Stock Exchange were used in the study which formed the sample size. The study used secondary sources of data from Central Bank of Nigeria as well as from annual reports and financial statement of accounts of deposit money banks under investigation from 2010-2022. The Structural Equation Modeling was used to test the formulated hypotheses at 5% level of significance. The findings showed that credit risk had a significant but negative effect on firm value of deposit money banks in Nigeria. Liquidity risk had an insignificant but positive effect on firm value of deposit money banks. Operational risk had less significant but positive effect on firm value of deposit money banks. Capital adequacy risk had a positive and significant effect on firm value of deposit money banks. Market risk had a significant but negative effect on firm value of deposit money banks in Nigeria. The study recommended that banks should ensure that their credit exposures are adequately managed. Banks should apply proper liquidity management strategies and they should use competent and skilful employees that are experts in banking professionalism. Banks should continue to be mindful of ceaseless and high incidence of market volatility in stock prices and they should use other forms of financial engineering strategies such as the use of options, futures and swaps so as to manage their market risk exposures