Enterprise Risk Management and Financial Performance of Nigerian Deposit Money Banks (2014-2022)

Abstract

This study investigates the effect of enterprise risk management on the financial performance of quoted deposit money banks in Nigeria from 2014 to 2022. The independent variable – enterprise risk management – was proxied by capital adequacy risk and non-performing loan risk, while the dependent variable – financial performance – was measured by return on assets. A sample of size of 10 DMB was utilised. The secondary data was sourced from the annual reports of the sampled deposit money banks for the nine (9) years studied. The panel data were diagnosed using descriptive statistics, the Pearson correlation matrix, the Shapiro-Wilk data normality test, the Ramsey RESET and the heteroskedasticity test. The hypotheses were tested with the use of the robust random-effects regression, and the result revealed that capital adequacy risk has a positive and insignificant effect, while non-performing loan risk has a significant negative effect on financial performance. The findings suggest that Nigerian banks should have a strong capital base and do all they can to minimise loan defaults for better financial performance. This study offers practical insights into how risk management practices directly influence performance in highly regulated and credit-risk-sensitive banking institutions in Nigeria.