EFFECT OF LIQUIDITY MANAGEMENT ON FINANCIAL PERFORMANCE OF SELECTED LISTED DEPOSIT MONEY BANKS IN NIGERIA
Abstract
This study examines the Effect of Liquidity Management on the Financial
Performance of Deposit Money Banks (DMBs) in Nigeria between 2020 and 2024.
Specifically, it investigates the relationship between loan to total assets ratio,
liquidity ratio, and loan to deposit ratio and return on assets (ROA) of five topperforming DMBs selected based on Global Finance Best Banks Awards 2024. The
study adopts an ex post facto design, using secondary data. Panel regression
analysis, including pooled, fixed, and random effect models, was employed to assess
the impact of liquidity management variables on profitability. Findings reveal that
liquidity management measures do not exert a statistically significant effect on bank
profitability, while firm size showed a significant negative impact on ROA. The
Hausman test confirmed the fixed effect model as the most appropriate for the data.
The study concludes that effective liquidity management alone may not directly drive
profitability in Nigerian banks; instead, other structural and operational factors such
as bank size are equally critical. It recommends that banks strike a balance between
liquidity and profitability, adopt cost-control measures to mitigate scale
inefficiencies, and integrate liquidity management within broader risk and strategic
frameworks to sustain financial performance and competitiveness.
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