EFFECTIVE ASSETS INVESTMENT AND FINANCIAL PERFORMANCE: EVIDENCE FROM DEPOSIT MONEY BANKS IN NIGERIA (2013-2022)

Abstract

This is a quasi-experimental study that investigated the relationship between assets investment and financial performance of deposit money banks (DMBs) in Nigeria for a period of 10 years ranging from 2012 to 2022. The study used time series, secondary data collected from annual financial reports of the purposefully selected banks to estimate how effective assets investment affected the financial health of DMBs in Nigeria. An econometric model was specified in this study using return on assets (ROA) as the metrics for financial performance while cash and cash equivalents like money market products, tangible assets like plants and equipment and intangible assets were used as indicators of asset investment which is the independent variable. Linear regression tool was adopted in the analysis and the results revealed a positive and significant correlation between dependent variable, ROA and the independent variables, the asset investment indices. Based on this findings, the study concluded that effective assets investment is a good predictor of sound financial health of the DMBs in Nigeria and it was further recommended among other things that DMBs in Nigeria should adopt optimal investment mix that will enable them become more profitable as to enhance their earning-retention potentials and high financial performance and also the Central Bank of Nigeria’s guideline on assets investment for DMBs should be adequately monitored and evaluated with offenders sanctioned in order to ensure prudence, effectiveness and overall financial soundness in the financial sector.