Determinants of performance: A cross generational analysis of Nigerian banks
European Journal of Social Sciences
Department of Accounting and Finance, Faculty of Business and Social Sciences, University of Ilorin, Ilorin, Nigeria
The performance of banks is of importance to investors because it determines both the returns on investment and it is a measure of economic stability and secured investment environment. A number of factors are used in the measurement of bank performance in a typical developing economy. This study uses selected first and second generation banks in Nigeria to examine critical variables that may explain the performance of the banks. In all ten banks were purposively sampled to include each of first and second generation banks. For each generation, aggregate performance was computed as a proxy of the declared profit for 10 years. Aggregate value was also obtained for the dividend declared, amount retained for expansion, new shares sold out to the public, age of banks, customer base and shareholders fund. A multiple regression analysis of the variables adopted to examine the nature of the relationship between declared profit (y) and the variables (X1 -X6), where Y=a+biXi+b2X2+.........+bnXn. A structured questionnaire was also used to capture the perception of shareholders on bank performance in four out of the ten selected banks. The result of the study shows that the performance of a bank was accounted for by the amount of profit paid out as dividend. The profit withheld for expansion and new share sold to the public with the R2 value of 92.9% and double log of 97.7%. From the study bank performance is both a result of dividend paid out (92.9%) profit withheld for expansion (97.7%). Age of banks was show not to be related to the performance of banks. To corroborate this, the study showed that shareholders believe that the proportion of dividend paid to shareholders is a major determinant of performance. The study therefore recommends that Nigerian Banks should redirect their focus to early dividend payment and regular declaration of dividend as one of the tools of attaining better performance.