Risk-Taking Behaviour and Profit Efficiency among Nigerian Listed Deposit Money Banks
DOI:
https://doi.org/10.61143/umyu-jafr.8(1)2025.003Keywords:
Capital risk, liquidity risk, profit efficiency, risk-taking behaviourAbstract
The study explored the influence of risk-taking behavior on profit efficiency among Nigerian banks. It utilized a longitudinal research design and drew on secondary data from the audited annual accounts of selected banks. The population included 14 publicly quoted Deposit Money Banks (DMBs) in Nigeria, and a sample of 11 DMBs was chosen using a purposive sampling technique. Multiple regression analysis was applied to the data, showing that capital risk has a positive and significant influence on the profit efficiency of listed banks (t = 6.4913; p < 0.01). This indicates that well-capitalized banks tend to have higher profitability because they face fewer constraints when expanding their outputs. Additionally, the study found that insolvency risk negatively affects profit efficiency (t = -2.7399; p < 0.01) and that liquidity risk also has a significant negative effect (t = -2.3062; p < 0.05). This suggests that high liquidity risk can create challenges in managing cash flows. In conclusion, the study determined that risk-taking behavior significantly impacts the profit efficiency of Nigerian-listed deposit money banks. It recommended that Nigerian banks reassess their credit risk management strategies to improve profitability and create a more stable banking environment.
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