EFFECT OF CREDIT RISK ON SHAREHOLDERS' VALUE ON DEPOSIT MONEY BANKS IN NIGERIA
Abstract
Banks have been known for their role of financial intermediation and by this function exposed to credit risk. A sound credit risk decision bybanks is very vital as it enhances earnings as well as increases shareholders'wealth. This study examines the effect of credit risk on shareholders'value on Deposit Money Banks in Nigeria. Data were sourced from audited annual report of the nine (9) banks samnpled for a period ofthirteen (13) years from 2010 to 2022. A panel multiple regression technique ofdata analysis was applied using the Generalized Least Square (GLS) estimators. The GLS model regressed the predictor variables of non-performing loans (NPL), loan loss provisions (LLP), and capital adequacy(CAR) on market capitalization while controlling for bank size. The result shows that credit risk has a significant effect on shareholders' value ofDeposit Money Banks in Nigeria. Non-performing loans and loan loss provision reveal a negative significant effect of shareholders' value, implying that increase in Non-performing loans and loan loss provision willreduce shareholders' value. Hence, the study recommends that Deposit Money Banks in Nigeria should redefine and restructure their credit products and also formulate credit policies that will ensure operational consistency as well as curtail lending that could lead to losses.
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