TITLE:
Market Risks Management and Performance of Deposit Money Banks in Nigeria: The Challenges of 4th Industrial Revolution
AUTHORS:
Hope Ifeoma Orjinta, Enaibre Felix Ighosewe
KEYWORDS:
Market Risks, Foreign Exchange, Interest Rate, Equity Risks and Performance
JOURNAL NAME:
Modern Economy,
Vol.13 No.11,
November
30,
2022
ABSTRACT: This study examined the effect of market risks
on performance of 15 banks in Nigeria spanning from 2011 to 2020. The study
relied on secondary data derived from the selected banks’ financial statements
to determine and measure the effect of fluctuations in market risks on Nigerian
banks performance in this era of 4th industrial revolution by applying
an all-inclusive panel least square estimate. The study used the ex-post facto
research design. The data were obtained from annual reports of the 15 sampled banks. Accordingly, four (4)
specific objectives and hypotheses were stated and the data obtained were
subjected to some preliminary tests such as descriptive, correlation analysis
and variance inflation factor. The hypotheses were tested and analyzed using
panel least square estimate. The empirical analysis covered 150
bank-year observations and the results shows that interest rate risk (IRSK), foreign exchange rate risk (FXRSK) and
capital adequacy risk (CARSK)
have negative yet noticeable effect on the Nigerian banks’ performance while
equity risk (EQRSK) have positive yet minimal effects on Nigerian banks’
performance on the short run. Meanwhile, on the Kao Cointegration test
evidenced that, market risk has a long run effect on banks’
performance in Nigeria. Consequently, market risk measured by IRSK, FXRSK, and
CASK decreases the likelihood for Nigerian banks to make huge profit to a very
large extent in the periods under review. As such, if Nigerian banks desire
higher income especially in this era of 4th industrial revolution,
they need to optimally manage their market risks.