RESEARCH JOURNAL OF BUSINESS AND ECONOMIC MANAGEMENT
Integrity Research Journals
ISSN: 2756-6676
Model: Open Access/Peer Reviewed
DOI: 10.31248/RJBEM
Start Year: 2017
Email: rjbem@integrityresjournals.org
Effect of earnings generation and retention capacity on the financial performance of Deposit Money Banks in Nigeria
https://doi.org/10.31248/RJBEM2022.078 | Article Number: 58BA416C1 | Vol.5 (1) - October 2022
Received Date: 29 April 2022 | Accepted Date: 18 August 2022 | Published Date: 30 October 2022
Authors: Chinazu Akonye* , Ugochukwu J. Nwoye , Segun I. Adeniyi and Emma I. Okoye
Keywords: profitability, Asset utilisation, cost management strategies, earnings generation, earnings retention
This study evaluates the generation and retention capacities of financial earnings of Deposit Money Banks (DMBs) in Nigeria. There has been a widening gap between earnings generated and portion of the earnings retained thereof vis-a-vis the annual financial profits disclosures by DMBs, hence this study examines whether Earnings Generation Capacities (EGC) and Earnings Retention Capacities (ERC) of DMBs optimize their annual financial profit disclosures. This study adopts the ex post facto research design using secondary data from annual reports of seven DMBs from 2015 to 2020. Panel Regression Technique aided by E-View 9.0 statistical software was used for analyses. The results show that EGC and ERC have significant positive and negative effects respectively on the profitability of DMBs in Nigeria. This implies that assets of the DMBs are underutilized and cost management strategies under-optimized thereby undermining the achievement of optimal earnings generation and retention capabilities. The study recommends that DMBs need to improve on their asset utilization strategies and also adopt efficient in-house cost curtailment initiatives on Procurement and Equipment Asset Maintenance Costs (PEAMC) to enable DMBs to boost profitability, and strengthen going concern to meet shareholders’ return expectations.
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