Bank Performance Based on Return on Equity: The Relationship with Enterprise Risk Management Indicators

Olayinka, Odutola and Ikpefan, Ochei Ailemen and Omankhanlen, A. E (2024) Bank Performance Based on Return on Equity: The Relationship with Enterprise Risk Management Indicators. Innovations (78). pp. 1174-1194.

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Abstract

In this study, the researchers provide a fresh examination on the nexus between return on equity and enterprise risk management indicators for a panel of Nigerian banks using pooled OLS, WG-VC and flexible GLS methods. The study aims to determine whether the relationship with ERM will improve the performance (return on equity) of the Deposit Money Banks. The findings show that the chief risk officer, members of the risk committee, and derivative instruments for hedging foreign exchange rate risk have a positive impact on return, while risk mapping and derivative instruments for hedging credit risk maintain a positive relationship with return on equity. Banks have continued to fail due to high levels of non-performing loans, poor corporate governance, negligent credit administration, and failure to meet liquidity and capital ratio prudential ratios. The result clearly showed that enterprise risk management is a positive driver of return on equity. The study concludes that return on equity increase with an increase in risk committee member and derivative instrument for hedging foreign exchange risk, while the other three ERM indicators and return on equity move in a different direction, that is a negative relationship is evident. Financial institutions should weigh the risk vs the potential rewards to decide whether the risk is worthwhile. They can benefit from risks that are worthwhile taking as a result both in the short and long term.

Item Type:	Article
Uncontrolled Keywords:	Banks, Deposit, Equity, Enterprise, Money, Performance, Return, Risk
Subjects:	H Social Sciences > HF Commerce H Social Sciences > HF Commerce > HF5601 Accounting H Social Sciences > HJ Public Finance
Divisions:	Faculty of Law, Arts and Social Sciences > School of Management Faculty of Law, Arts and Social Sciences > School of Social Sciences
Depositing User:	Patricia Nwokealisi
Date Deposited:	07 Nov 2024 09:13
Last Modified:	07 Nov 2024 09:13
URI:	http://eprints.covenantuniversity.edu.ng/id/eprint/18566

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