EFFECT OF CAPITAL ADEQUACY ON FINANCIAL PERFORMANCE OF QUOTED DEPOSIT MONEY BANKS IN NIGERIA
Durojaye Afees, Salihu Liman Mairafi , Vincent Harrison S. and Musa Sadiq Abdul-Khadir
Volume 13 Issue 2
Abstract
This study examined the effect of capital adequacy on the financial performance of quoted deposit money banks in Nigeria. Specifically, the study investigated the influence of capital adequacy ratio (CAR) on return on assets (ROA) while controlling for firm size. The population of the study comprised all deposit money banks quoted on the Nigerian Exchange Group as of 2025, from which eleven banks were purposively selected based on data availability, consistency in operations, and accessibility of audited financial reports over the period 2016-2025. The study adopted an ex post facto research design. The Hausman specification test indicated that the random effects panel regression model was the most appropriate estimation technique. The findings revealed that capital adequacy ratio exerts a positive and statistically significant effect on return financial performance among quoted deposit money banks in Nigeria. Based on the findings, the study recommends that deposit money banks should continue to maintain sound capital adequacy practices while ensuring efficient deployment of available capital toward productive and income-generating banking activities in order to sustain profitability and enhance financial stability. Keywords: Capital Adequacy Ratio, Financial Performance, Return on Assets, Deposit Money Banks, Firm Size
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