Nigerian Banks’ Specific Factors and Market Share Price Nexus: A Cointegration Approach

Authors

  • Shamisudeen O. Badmus PhD Candidate, London Metropolitan University, 84 Moorgate, London, EC2M 6SQ, United Kingdom
  • Matthew A. Abata Associate Professor, Department of Accounting, Faculty of Management Sciences, Lagos State University, Ojo, Lagos, Nigeria
  • Yusuf A. Soyebo Lecturer, Department of Banking and Finance, Faculty of Management Sciences, Lagos State University, Ojo, Lagos, Nigeria

Keywords:

Banks, Non-Performing Loans, Market Price, Performance.

Abstract

In modern banking operations, reports on banks’ failure, classified loans and the size of assets, as well as erratic share-price movements, have stirred the interest of various stakeholders in Nigerian banking industry. This study investigates the long-run relationship between Nigerian banks’ specific factor and market share prices using the Pedroni cointegration approach – based on data from 11 out of 15 quoted banks between 2003 and 2015. The specified variables cointegrated for panel analysis and the observed long-run relationship were estimated using Dynamic Ordinary Least Square (DOLS). The result shows a negative relationship between return on assets and market price of shares. Thus, it is recommended that banks should initiate a bad debt reduction policy and diversify their loan portfolios to less risky sectors. Similarly, an optimum asset holding policy should be formulated by banks’ managers for easy classification of assets as either performing or relinquished ones. In addition, investors should diversify their investment holdings optimally across bank assets, non-bank assets, and government stocks.

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Published

2018-02-22

How to Cite

O. Badmus, S., A. Abata, M., & A. Soyebo, Y. (2018). Nigerian Banks’ Specific Factors and Market Share Price Nexus: A Cointegration Approach. International Journal of Sciences: Basic and Applied Research (IJSBAR), 37(2), 275–287. Retrieved from https://www.gssrr.org/index.php/JournalOfBasicAndApplied/article/view/8381

Issue

Vol. 37 No. 2 (2018)

Section

Articles

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