The Impact of Credit Risk on the Value of Shareholders of Listed Banks in Nigeria

Sani Abdul Rahman Bala; Babangida Mohammed Auwal; Muhammad Yunusa Salisu

doi:doi:10.11648/j.ijafrm.20220701.14

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The Impact of Credit Risk on the Value of Shareholders of Listed Banks in Nigeria

Sani Abdul Rahman Bala, Babangida Mohammed Auwal, Muhammad Yunusa Salisu

Published in International Journal of Accounting, Finance and Risk Management (Volume 7, Issue 1)

Received: 20 February 2022 Accepted: 16 March 2022 Published: 23 March 2022

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Abstract

Credit risk is the weightiest menace that banks encountered during their operations. Various banking crises have prompted banks to focus more on credit risk management activities, as it is critical for banks to maximize the wealth of their shareholders. The primary goal of businesses is to maximize shareholder wealth, as such DMBs are expected to engage in risk management operations if and only if it adds value to both the firm and the shareholders. Thus, this study seeks to establish the influence of credit risks on the profitability of listed Nigerian DMBs. The ex-post facto method was adopted and the researchers sampled eight (8) out of twenty-four (24) quoted DMBs on the Nigerian Group Exchange. Data was sourced from the audited annual accounts of the sampled DMBs for a period of four years, spanning from 2015–2019. OLS regression techniques revealed that non-performing loans (NPL) have an insignificant influence on the profitability of the sampled DMBs (=-0.141; p, 0.797). This implies that a 1% increase in NPL would lead to a 14% decrease in shareholders’ value. Loan and advances (LAD) according to the regression models exert a significant influence on shareholders’ value (=7.341; p, 0.004). This implies that an increase in LAD will leads to an increase in the shareholders’ value. Nigerian banks should keep their loan and advance portfolios because it makes them more valuable to their shareholders.

Published in	International Journal of Accounting, Finance and Risk Management (Volume 7, Issue 1)
DOI	10.11648/j.ijafrm.20220701.14
Page(s)	27-33
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Credit Risk, Shareholders’ Value, Non-performing Loans, Loan & Advances, Loan Loss Provisions

References

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APA Style

Sani Abdul Rahman Bala, Babangida Mohammed Auwal, Muhammad Yunusa Salisu. (2022). The Impact of Credit Risk on the Value of Shareholders of Listed Banks in Nigeria. International Journal of Accounting, Finance and Risk Management, 7(1), 27-33. https://doi.org/10.11648/j.ijafrm.20220701.14

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ACS Style

Sani Abdul Rahman Bala; Babangida Mohammed Auwal; Muhammad Yunusa Salisu. The Impact of Credit Risk on the Value of Shareholders of Listed Banks in Nigeria. Int. J. Account. Finance Risk Manag. 2022, 7(1), 27-33. doi: 10.11648/j.ijafrm.20220701.14

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AMA Style

Sani Abdul Rahman Bala, Babangida Mohammed Auwal, Muhammad Yunusa Salisu. The Impact of Credit Risk on the Value of Shareholders of Listed Banks in Nigeria. Int J Account Finance Risk Manag. 2022;7(1):27-33. doi: 10.11648/j.ijafrm.20220701.14

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@article{10.11648/j.ijafrm.20220701.14,
  author = {Sani Abdul Rahman Bala and Babangida Mohammed Auwal and Muhammad Yunusa Salisu},
  title = {The Impact of Credit Risk on the Value of Shareholders of Listed Banks in Nigeria},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {7},
  number = {1},
  pages = {27-33},
  doi = {10.11648/j.ijafrm.20220701.14},
  url = {https://doi.org/10.11648/j.ijafrm.20220701.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20220701.14},
  abstract = {Credit risk is the weightiest menace that banks encountered during their operations. Various banking crises have prompted banks to focus more on credit risk management activities, as it is critical for banks to maximize the wealth of their shareholders. The primary goal of businesses is to maximize shareholder wealth, as such DMBs are expected to engage in risk management operations if and only if it adds value to both the firm and the shareholders. Thus, this study seeks to establish the influence of credit risks on the profitability of listed Nigerian DMBs. The ex-post facto method was adopted and the researchers sampled eight (8) out of twenty-four (24) quoted DMBs on the Nigerian Group Exchange. Data was sourced from the audited annual accounts of the sampled DMBs for a period of four years, spanning from 2015–2019. OLS regression techniques revealed that non-performing loans (NPL) have an insignificant influence on the profitability of the sampled DMBs (=-0.141; p, 0.797). This implies that a 1% increase in NPL would lead to a 14% decrease in shareholders’ value. Loan and advances (LAD) according to the regression models exert a significant influence on shareholders’ value (=7.341; p, 0.004). This implies that an increase in LAD will leads to an increase in the shareholders’ value. Nigerian banks should keep their loan and advance portfolios because it makes them more valuable to their shareholders.},
 year = {2022}
}

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TY - JOUR
T1 - The Impact of Credit Risk on the Value of Shareholders of Listed Banks in Nigeria
AU - Sani Abdul Rahman Bala
AU - Babangida Mohammed Auwal
AU - Muhammad Yunusa Salisu
Y1 - 2022/03/23
PY - 2022
N1 - https://doi.org/10.11648/j.ijafrm.20220701.14
DO - 10.11648/j.ijafrm.20220701.14
T2 - International Journal of Accounting, Finance and Risk Management
JF - International Journal of Accounting, Finance and Risk Management
JO - International Journal of Accounting, Finance and Risk Management
SP - 27
EP - 33
PB - Science Publishing Group
SN - 2578-9376
UR - https://doi.org/10.11648/j.ijafrm.20220701.14
AB - Credit risk is the weightiest menace that banks encountered during their operations. Various banking crises have prompted banks to focus more on credit risk management activities, as it is critical for banks to maximize the wealth of their shareholders. The primary goal of businesses is to maximize shareholder wealth, as such DMBs are expected to engage in risk management operations if and only if it adds value to both the firm and the shareholders. Thus, this study seeks to establish the influence of credit risks on the profitability of listed Nigerian DMBs. The ex-post facto method was adopted and the researchers sampled eight (8) out of twenty-four (24) quoted DMBs on the Nigerian Group Exchange. Data was sourced from the audited annual accounts of the sampled DMBs for a period of four years, spanning from 2015–2019. OLS regression techniques revealed that non-performing loans (NPL) have an insignificant influence on the profitability of the sampled DMBs (=-0.141; p, 0.797). This implies that a 1% increase in NPL would lead to a 14% decrease in shareholders’ value. Loan and advances (LAD) according to the regression models exert a significant influence on shareholders’ value (=7.341; p, 0.004). This implies that an increase in LAD will leads to an increase in the shareholders’ value. Nigerian banks should keep their loan and advance portfolios because it makes them more valuable to their shareholders.
VL - 7
IS - 1
ER -

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Author Information

Sani Abdul Rahman Bala

Department of Accounting, Faculty of Management Sciences, Usmanu Danfodiyo University, Sokoto, Nigeria
Babangida Mohammed Auwal

Department of Accounting, Faculty of Management Sciences, Usmanu Danfodiyo University, Sokoto, Nigeria
Muhammad Yunusa Salisu

Department of Accounting, Federal University Birnin Kebbi, Kebbi, Nigeria

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APA Style

Sani Abdul Rahman Bala, Babangida Mohammed Auwal, Muhammad Yunusa Salisu. (2022). The Impact of Credit Risk on the Value of Shareholders of Listed Banks in Nigeria. International Journal of Accounting, Finance and Risk Management, 7(1), 27-33. https://doi.org/10.11648/j.ijafrm.20220701.14

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ACS Style

Sani Abdul Rahman Bala; Babangida Mohammed Auwal; Muhammad Yunusa Salisu. The Impact of Credit Risk on the Value of Shareholders of Listed Banks in Nigeria. Int. J. Account. Finance Risk Manag. 2022, 7(1), 27-33. doi: 10.11648/j.ijafrm.20220701.14

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AMA Style

Sani Abdul Rahman Bala, Babangida Mohammed Auwal, Muhammad Yunusa Salisu. The Impact of Credit Risk on the Value of Shareholders of Listed Banks in Nigeria. Int J Account Finance Risk Manag. 2022;7(1):27-33. doi: 10.11648/j.ijafrm.20220701.14

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@article{10.11648/j.ijafrm.20220701.14,
  author = {Sani Abdul Rahman Bala and Babangida Mohammed Auwal and Muhammad Yunusa Salisu},
  title = {The Impact of Credit Risk on the Value of Shareholders of Listed Banks in Nigeria},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {7},
  number = {1},
  pages = {27-33},
  doi = {10.11648/j.ijafrm.20220701.14},
  url = {https://doi.org/10.11648/j.ijafrm.20220701.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20220701.14},
  abstract = {Credit risk is the weightiest menace that banks encountered during their operations. Various banking crises have prompted banks to focus more on credit risk management activities, as it is critical for banks to maximize the wealth of their shareholders. The primary goal of businesses is to maximize shareholder wealth, as such DMBs are expected to engage in risk management operations if and only if it adds value to both the firm and the shareholders. Thus, this study seeks to establish the influence of credit risks on the profitability of listed Nigerian DMBs. The ex-post facto method was adopted and the researchers sampled eight (8) out of twenty-four (24) quoted DMBs on the Nigerian Group Exchange. Data was sourced from the audited annual accounts of the sampled DMBs for a period of four years, spanning from 2015–2019. OLS regression techniques revealed that non-performing loans (NPL) have an insignificant influence on the profitability of the sampled DMBs (=-0.141; p, 0.797). This implies that a 1% increase in NPL would lead to a 14% decrease in shareholders’ value. Loan and advances (LAD) according to the regression models exert a significant influence on shareholders’ value (=7.341; p, 0.004). This implies that an increase in LAD will leads to an increase in the shareholders’ value. Nigerian banks should keep their loan and advance portfolios because it makes them more valuable to their shareholders.},
 year = {2022}
}

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