For correspondence:-
Received: September 7, 2019 Accepted: September 21, 2019 Published: September 30, 2019
Citation: Impairment Charges and Performance of Deposit Money Banks in Nigeria. Account Tax Rev 2004; 3(3):105-120 doi:
© 2004 The authors.
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Abstract
This study investigates the effect of impairment charges on performance of Deposit Money Banks (DMBs) in Nigeria. Specifically, the objectives of this study are to ascertain the effect of Loan impairment charges (LIC) and non-loan impairment charges (NLIC) on performance of (DMBs) in Nigeria. The study adopted the ex-post facto research design using the Panel regression Data technique. The study made use of secondary data obtained from the Nigeria Stock Exchange Fact books and Annual reports & accounts of the eight (8) sampled DMBs. A sample of eight (8) Domestic Systemically Important Banks (D-SIBs) based on Central Bank of Nigeria (CBN) ranking were selected using the purposive sampling technique from a population of sixteen (16) DMBs whose shares were listed in the Nigeria Stock Exchange as at December 31, 2018. The study hypotheses were tested using the Panel Least Square (PLS) regression, Granger Causality test and Hausman test with the aid of E-View 9.0 statistical software. Our findings revealed that impairment charges (both Loan & Non-Loan impairment charges) have significant negative effect on Earnings Per Share of (DMBs) in Nigeria. This study concluded that bothloan impairment charges and non-loan impairment charges occur due to weak credit monitoring policy by Deposit Money Banks in Nigeria. The study recommends that Deposit Money Banks should beef up their credit control and monitoring policies in order to minimize heavy impairment charges which adversely affect the banks’ performance. Also, Deposit Money Banks should design and implement their own internal prudential guidelines with shorter periods for detection of early warning signals on loans and non-loan exposures as a means of self-regulation for improved performance.
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