Kajola S., Sanyaolu W., Alao A.-A., Babatolu A. DETERMINANTS OF LIQUIDITY MANAGEMENT: EVIDENCE FROM NIGERIAN BANKING SECTOR

DOI: https://doi.org/10.15688/ek.jvolsu.2021.3.9

Sunday Kajola

Senior Lecturer, Department of Accounting, Federal University of Agriculture, PMB 2240 Abeokuta, Nigeria, This email address is being protected from spambots. You need JavaScript enabled to view it. , https://orcid.org/0000-0002-6490-7635

Wasiu Sanyaolu

Lecturer, Department of Accounting, Crescent University, PMB 2104 Sapon, Abeokuta, Nigeria; PhD Сandidate, University of Benin, Benin, Nigeria, This email address is being protected from spambots. You need JavaScript enabled to view it. , https://orcid.org/0000-0002-0695-1961

Abdul-Azeez Alao

Lecturer, Department of Accounting, Olabisi Onabanjo University, PMB 2002 Ago-Iwoye, Nigeria, This email address is being protected from spambots. You need JavaScript enabled to view it. , https://orcid.org/0000-0003-1710-9734

Ayorinde Babatolu

Lecturer, Department of Accounting, Federal University of Agriculture, PMB 2240 Abeokuta, Nigeria; PhD Candidate, Kwara State University, Ilorin, Nigeria, This email address is being protected from spambots. You need JavaScript enabled to view it. , https://orcid.org/0000-0002-9176-6727


Abstract. The study examined the determinants of liquidity management in twelve Nigerian banks during 2009–2018. Liquidity ratio (LQR) and deposit to asset ratio (DAR) were used as surrogates for liquidity management. As the potential liquidity management determinant indicators, five bank-specific variables (capital adequacy, size, asset quality, profitability and deposit growth) and three macroeconomic variables (GDP growth rate, inflation rate and interest rate) were used as proxies. Results from balanced fixed effects least square regression analytical technique show that size, profitability, GDP growth rate and inflation rate are important liquidity determinants in Nigerian banks. Specifically, bank size has a positive and significant influence on LQR, while GDP growth rate and inflation rate exhibit a negative and significant relationship with LQR. It further reveals a positive and significant relationship between profitability (ROA) and DAR. It is recommended that banks’ management should focus attention on both bank-specific (size and profitability) and macroeconomic (GDP growth and inflation rate) factors when deciding appropriate liquidity management strategy to be adopted. These four variables have the capacity to influence the profitability, sustainable growth and survival of banks operating in a volatile business environment such as Nigeria.

Key words: deposit money banks, determinants, liquidity, Nigeria, panel data.

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DETERMINANTS OF LIQUIDITY MANAGEMENT: EVIDENCE FROM NIGERIAN BANKING SECTOR by Kajola S., Sanyaolu W.,  Alao A.-A., Babatolu A. is licensed under a Creative Commons Attribution 4.0 International License.

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