European Journal of Accounting, Finance and Investment

Assets Quality On The Financial Performance Of Quoted Commercial Banks In Nigeria

Dr. Henry Waleru Akani

Department of Banking and Finance, Rivers State University Nkpolu - Port Harcourt, Rivers State, Nigeria

Keywords: Assets Quality, Financial Performance, Quoted Commercial Banks

Abstract

This study examined the effect of assets quality on the financial performance of quoted commercial banks. The objective was to examine the extent to which assets quality affect return on assets of the quoted commercial banks in Nigeria. Secondary data were obtained from financial statement of 13 quoted commercial banks from 2011 – 2020.  Return on assets was modeled as the function of Non-Performing Loans, Non-Performing loans to Total Deposit, Non-Performing loans to total Assets and Non-Performing Loans to Total Liabilities. Panel data methods were employed while the fixed and random effects models were used as estimation technique at 5% level of significance. Fixed effects, random effects and pooled estimates were tested while the Hausman test was used to determine the best fit. The result of fixed effect estimation reveals that the adjusted R-squared (R2) that is 97.2 percent, implying that the independent variables such as nonperforming loans, performing loans to total debt, performing loans to total assets and performing loans to total loans and advances. the study further indicates that  nonperforming loans,  nonperforming loans to total deposits,   nonperforming loans to total assets and nonperforming loans to total assets have negative effect on the return on assets while nonperforming loan to total loans and advances have positive effect on the dependent variable. The study concludes that there is no significant relationship between non-performing loans to total loans and the return on assets, no significant relationship between non-performing loans to total deposit and the return on assets, there is no significant relationship between non-performing loans to total assets and the return on assets and that there is significant relationship between non-performing loans to total liability and the return on assets of Nigerian commercial banks. From the findings, we recommend the need for banks to establish effect credit management and credit appraisal strategies that will reduce the incidence of poor assets quality that affects negatively the financial performance of the commercial banks.