Effect of Firms Attributes on Non-Performing Loans of Listed Deposit Money Banks in Nigeria

Abstract

This study investigates the effect of firm’s attributes on non-performing loans of listed deposit money banks in Nigeria. Firm attributes was proxied by (firms size, liquidity and capital adequacy) while non-performing loans was proxied by (the ratio of non-performing loans to total loan). 2010-2019 were the period under review. The study adopts the ex-postfacto research design. Annual data used in the study were sourced from the fact books of the Nigerian stock exchange and the financial statement of the banks. Descriptive statistics, correlation matrix and the ordinary least square (OLS) multiple regression techniques were the main statistical tools used in the analysis of data. Additionally, the study conducted hausman test to choose between the fixed and random effect model which will be acceptable. The anticipated income theory was relied on as it provides the most useful theoretical explanation for the study. The result of the regression reveals that, firm size and liquidity has no significant effect of non-performing loan, while capital adequacy has significant effect on non-performing loans. Based on the findings, the study concludes that the CBN should raise capital adequacy ratio from10% since increasing CAR reduces NPLs base on the findings of this study. Banks should also sure up their capital based because it serve as a buffer and it will enables them absorb the challenges that may arise from the volume of non-performing loan they may encounter..