DETERMINANTS OF DEPOSIT MONEY BPROFITABILITY IN NIGERIA

  • Chapters:5
  • Pages:69
  • Methodology:Ordinary Least Square
  • Reference:YES
  • Format:Microsoft Word
(Business Administration and Management)
DETERMINANTS OF DEPOSIT MONEY  BPROFITABILITY IN NIGERIA
ABSTRACT

This study is to establish the determinants of deposit money banks’ profitability in Nigeria. The specific objectives are to: examine the relationship between inflation and deposit money banks’ profitability, investigate the relationship between interest rate and deposit money banks’ profitability, evaluate the effect of GDP growth on deposit money banks’ profitability, ascertain the impact of capital adequacy and deposit money banks’ profitability and also examine the relationship between banks size and deposit money banks’ profitability.
The sample consists of five (5) banks listed on the Nigeria Stock Exchange (NSE) for the period 2005-2014. The banks were selected using convenience sampling technique. The panel data regression analyses tool was used to analyze the data. Using the data collected, the model is estimated using the Ordinary Least Square technique (OLS).
This research find out that capital adequacy (CAPA), and bank’s size (BANS) are statistically significant with banks’ profitability indicating that these internal bank variables are some of the most significant bank specific variables that determine the profitability of Nigerian deposit money  banks. The macroeconomic variables (inflation rate (INF), lending interest rate (INTR), and gross domestic product (GDP) are not significant in this study. They do not appear to be major determinants of deposit money bank profitability in Nigeria.
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
Background to the Study    -    -    -    -    -    -     
Statement of  Research  Problem    -    -    -    -    -    
Research Question    -    -    -    -    -    
 Objectives of the Study    -    -    -    -    -
Research Hypotheses    -    -    -    -    -    -
Scope of the Study        -    -    -    -    -
Significance of the Study    -    -    -    -    -
Definition of Terms    -    -    
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction    -    -    -    -    -    -    -
2.2 Conceptual Review     -    -    -    -    -    -    -
2.2.1 The concept of Profitability    -    -    -    -    -    
2.2.2 Determinants of Banks’ Profitability    -    -    -    -
2.3 Empirical Literature    -    -    -    -    -    -    
2.4 Theoretical Framework    -    -    -    -    -    -    -    
2.4.1 Signaling theory    -    -    -    -    -    -    -    
2.4.2 Market power and efficient structure theory    -    -    -    
2.4.3 Economic theory and theory of banking firm    -    -    -    -
2.4.4 Edogenous growth theory    -    -    -    -    
CHAPTER THREE: METHODOLOGY
3.1 Introduction     -    -    -    -    -    -    -     
3.2 Research Design    -    -    -    -    -    -    
3.3 Population of the Study    -    -    -    -         
3.4 Sample and Sampling Techniques    -    -    -    -    
3.5 Source of Data    -    -    -    -    -    -    -    
3.6 Model Specification    -    -    -    -    -    -
3.6.1 Operational Definition of Variables    -    -    -    -    -
3.7Data Estimation Techniques    -    -    -    -    -    
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND RESULT
4.1 Introduction    -    -    -    -    -    -
4.2 Data Presentation and Analysis    -    -    -    -    -    
4.2.1 Panel least squares estimation    -    -    -    -    -    
4.2.2 Descriptive statistical analysis    -    -    -    -    -
4.2.3 Fixed effect model estimation    -    -    -    -    -    
4.3 Results Discussion    -    -    -    -
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Introduction    -    -    -    -    -    -    -    
5.2 Summary ofFindings    -    -    -    -    -    -
5.3 Conclusion    -    -    -    -    -    -    
5.4 Recommendations.     -    -    -    -    -    -    
5.5 Areas for further studies    -    -    -    -    -    -    
Bibliography    -    -    -    -    -    -    -    -    
Appendix  -    -    -    -    -    -    -    -    -
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Banking is an economic activity, which deals with the intermediation of funds between the surplus units and the deficit units of an economy and the channeling of such resources to profitable investments. Banks also facilitate the provision of an efficient payment system. A sound, profitable, efficient and well managed banking system contributes to the stability of the financial system and protects a country from any undesirable crisis (Athanasoglou, Brissimis&Mathaious2005).
Alper and Anbar (2011) posit that an efficient banking sector can promote economic growth, while credit insolvencies could result in systematic crisis. In Nigeria, banks are regarded as dominant financial institution thus, their health condition is crucial to the general health of the economy (Suffian, 2009). Therefore, having the knowledge of factors influencing commercial banks’ profitability is not only important but also essential in stabilizing the economy. The importance of banks’ profitability cannot be over emphasized.
Profitability is considered as a crucial objective to conduct a business without which money deposit banks will not be in business. With good profit figures, banks are able to enhance the confidence of their stakeholders, maximize shareholders wealth as well as being able to stay competitive in the financial market. However, to achieve their desired level of profits, banks are confronted with several factors both internal and external. Such factors include inflation rate, Interest rate, GDP growth, capital adequacy, bank size etc. This study therefore intends to establish how these factorsdetermine banks profitability in Nigeria.
1.2 STATEMENT OF THE RESEARCH PROBLEMa
    The performance of banks have of been of great concern for economic planners and policy makers due to the fact that the gains of the real sector of the economy  depend on how efficiently the banks are performing the function of financial intermediation.
Although the monetary authorities have taken some measures such as banks consolidation, reviews of prudential guidelines and bail-out strategy to stabilize the financial system and build confidence in the banking system. It is relevant to know about the determinants of deposit money banks profitability in order to properly direct policy making in the banking sector of Nigeria. Although, number of earlier studies have made to add their own contribution to the theory of profitability  and stated their own policy implication,  they were inclined towards to the advanced economies and less to developing countries like Nigeria. This research intend to fill this gap.
1.3 RESEARCH QUESTIONS
 The following research questions are relevant to this study:
What are the determinants of deposit money banks’ profitability in Nigeria?
What is the relationship between interest rate and deposit money banks’ profitability in Nigeria?
What is the effect of GDP growth on banks’ profitability in Nigeria?
What is the impact of capital adequacy on banks’ profitability in Nigeria?
What is the relationship between banks size and their profitability n Nigeria?
What is the relationship between inflation and deposit money banks profitability in Nigeria?
What is the relationship between inflation and deposit money banks’ profitability in Nigeria?
1.4 OBJECTIVES OF THE STUDY    
The broad objective of this study is to establish thedeterminants of deposit money banks’ profitability in Nigeria. The specific objectives are to:
examinethe relationship between inflation and deposit money banks’ profitability.
investigate the relationship between interest rate and deposit money banks’ profitability.
evaluatethe effect of GDP growth on deposit money banks’ profitability.
ascertainthe impact of capital adequacy and deposit money banks’ profitability.
examinethe relationship between banks size and deposit money banks’ profitability.
1.5  RESEARCH HYPOTHESES
In order to achieve the objectives of the study, the followinghypotheses areformulated to be tested regarding the determinants of profitability in Nigeria deposit money banks.
H1:    There is no significant relationship between inflation and deposit money banks’ profitability.
H2: There is no significant relationship between interest rate and deposit money banks’ profitability.
H3:    GDP growth has no significant effect on deposit money banks’ profitability.
H4:     Capital adequacy has no significant impact on deposit money banks’ profitability.
H5:    There is no significant relationship between bank size and deposit money banks’ profitability.
1.6    SCOPE OF THE STUDY
Identifying the determinants of the deposit money banks profitability in Nigeria is the major focus of this study. The study covers the period from 2000-2015 using panel data analysis. The study examined the effect of the internal and external factors determinants on profitability of Nigeria deposit money banks by focusing on different variables like profitability, inflation, interest rate, GDP growth, capital adequacy and banks size.
1.7    SIGNIFICANCE OF THE STUDY.
This study therefore significantly focus on the determinants of profitability of Nigeria deposit money banks and the extent they can affect the profitability of banks and also suggest policy implications. This study will revise, extend or create new knowledge, because developing countries like Nigeria have different institutional structures from developed economies. The study would serve as a reference point for future researchers who wish to carry out further studies on this topic. It will enable policy makers and managements of deposit money banks to adjust their bank management systems and mechanisms. It will also help investors to measure the performance of their portfolios and proceed with readjustment as required.
1.8    DEFINITION OF TERMS
Presented below are the definitions of all key unfamiliar terms.
Banks Size: Bank size is usually estimated by the size of the total asset of a particular bank. The bigger the size of the total asset also means the higher the profitability of that bank and vice versa as stated by Athanasoglou, et al. (2005).
Deposit Money  Bank: Is a type of bank that provides services such as accepting deposits, making business loans and offering basic investment products.
GDP Growth: Is a widely common macroeconomic variable used to determine bank performance.
Interest Rate: Is the rate at which interest is paid by borrowers (debtors) for the use of money that they borrow from lenders (creditors). It is the rate that is charged or paid for the use of money. The interest rate directly impact bank interest income and expenses and the net result that further affect profitability.
Inflation: Inflation shows the rate at which the general price level of goods and services keep rising while their pursing power is moving on the other direction.
Profitability: Profitability is the ability to make profit from all the business activities of an organization, company, firm, or an enterprise. It is the ability of a given investment to earn a return from its use (Herward&Uptom, 1991).
Capital adequacy: This is another internal factor for the measurement of profitability and the amount retain by the bank to meet unexpected loss and danger involved.

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Project Details

Department Business Administration and Management
Project ID BAM0699
Price ₦3,000 ($9)
Chapters 5 Chapters
No of Pages 69 Pages
Methodology Ordinary Least Square
Reference YES
Format Microsoft Word

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    Project Details

    Department Business Administration and Management
    Project ID BAM0699
    Price ₦3,000 ($9)
    Chapters 5 Chapters
    No of Pages 69 Pages
    Methodology Ordinary Least Square
    Reference YES
    Format Microsoft Word

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