Impact of Credit Risk Management on the Financial Performance of Selected Deposit Money Banks in Nigeria

Abstract

The study examined the impact of credit risk management on the financial performance of selected deposit money banks in Nigeria. The study focused on 10 deposit money banks randomly selected from 21deposit money banks listed on the Nigeria stock exchange as at 30th May, 2019. Data were collected from the annual reports of the selected banks over a period of 10 years. Single panel based model was used in the study. The result showed that loan and advances exert insignificant positive impact on return on asset, with reported coefficient estimate and probability value of 0.0006479 and 0.180 > 0.05) respectively. Reported R-square for the pooled OLS estimation stood at 0.5276, which implies that credit risk variables including loan and advances and non-performing loan can only explain about 53% of the systematic variation in return on asset. The study recommended that, Management of deposit money banks in Nigeria should be strategic when setting limits for loans and advances.