Liquidity Management and Market Value of Listed Deposit Money Banks in Nigeria
DOI:
https://doi.org/10.61143/umyu-jafr.8(1)2025.021Keywords:
Cash reserve ratio, current ratio, loan to deposit ratio, liquidity management, market valueAbstract
Illiquidity issue, due to high non-performing loan, reduces bank’s market capitalisation. This study looked at the influence of liquidity management on the market value of listed deposit money banks in Nigeria. The particular objectives examined; the influence of loan to deposit ratio, ascertain the impact of current ratio, and consider the influence of cash reserve ratio on the market value (Tobin Q and share price) of the banks. The 14 banks listed on Nigerian Exchange Group (NGX) comprised the study’s population. An ex post facto research design was utilised while a purposive sampling technique was applied to select 12 banks. Secondary data on liquidity management and market value were obtained from the annual reports as well as accounts of sampled banks over a period of 12 years (2011 to 2022). Inferential as well as descriptive statistics were utilised to analysed data obtained. Based on panel regression – random effect, the results revealed that only loan to deposit ratio among other substitutes had negative but significant influence on the market value (Tobin Q and share price). This indicates that banks should avoid a high loan-to-deposit ratio as it reduced a bank's market capitalisation. In conclusion, liquidity management influenced the market value of banks listed in Nigeria. This study recommended that while liquidity is essential, bank’s management should not maintain a higher rate of loan to deposit ratio because it will lessen the bank’s market capitalisation which will in turn weaken their capability to measure up with their financial responsibilities.Metrics
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