Capital Adequacy, Management and Performance in the Nigerian Commercial Bank (1986 – 2006)


This study investigates the impact of bank capital adequacy ratios, management and performance in the Nigerian commercial bank (1986 – 2006). The objectives of this paper are: to determine to what extent bank capital adequacy ratios impact on bank performance and also to investigate the extent to which operation expenses has impacted on the return on capital. The study captured their performance indicators and employed cross sectional and time series of bank data obtained from Central Bank of Nigeria (CBN) and Annual Report and Financial statements of the sampled banks. The formulated models were estimated using ordinary least square regression method. The overall capital adequacy ratios of the study shows that Shareholders Fund/Total Assets (SHF/TA) which measures capital adequacy of banks (risk of default) have negative impact on ROA. The efficiency of management measured by operating expenses indice is negatively related to return on capital. The implication of this study, among others, is that adequate shareholders fund can serve as a veritable stimulant in strengthening the performance of Nigerian commercial banks and also heighten the confidence of customers especially in this era of global economic melt-down that has taken its toll in the Nigerian financial system

Keywords: Buffer capital theory of capital adequacy, Capital Adequacy Ratios, Expense theory

Unique Article ID: EJBIR-137

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