EFFECT OF RISK MANAGEMENT PRACTICES ON THE PROFITABILITY OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study examined the effect of risk management practices on the profitability of listeddeposit money banks in Nigeria over the period 2015 to 2024. The study adopted an ex post facto research design and utilized panel data obtained from the annual reports of 14 listed banks, resulting in 140 observations. Profitability was measured using return on assets (ROA), while risk management practices were proxied by credit risk (CR), liquidity risk (LR), operational risk (OR), and capital adequacy ratio (CAR), with bank size as a control variable. Data were analyzed using descriptive statistics, correlation analysis, and panel regression techniques. The fixed effects regression results revealed that credit risk (? = -0.073, p = 0.000), liquidity risk (? = -0.018, p = 0.047), and operational risk (? = -0.082, p = 0.000) had significant negative effects on profitability, while capital adequacy (? = 0.059, p = 0.004) had a significant positive effect. The model explained 70.1% of the variation in profitability (R² = 0.701). The study concluded that effective risk management practices significantly influence bank profitability. It was recommended that bank management should strengthen credit risk management frameworks to reduce non-performing loans and improve financial performance.