MODERATING ROLE OF MARKET CAPITALISATION ON THE RELATIONSHIP BETWEEN CREDIT RISK MANAGEMENT AND FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study investigated the moderating effect of market capitalization on the relationship
between capital adequacy ratio CAR and return on Equity ROE. Correlation and panel data
multiple regression analyses was employed, using STATA 14 statistical software to generate
higher level of statistical validity. Quantitative research design was adopted and a
population of 21 DMBs in Nigeria spanning the period from 2013 to 2022 was used. The
study found significant effect between capital adequacy ratio and return on equity, while
market capitalization has no significant moderating effect with return on equity. The study
concludes that the moderating effect of market capitalization is not significant in determining
the association between capital adequacy ratio and financial performance of DMBs in
Nigeria. The study therefore recommends that that it is crucial for DMBs to implement
measures that strengthen the relationship between CAR and the financial performance. They
should incorporate CAR considerations into their strategic planning and capital allocation
decisions. This includes making informed decisions about asset growth, dividend policies,
and investment opportunities that align with maintaining an optimal CAR. Establishing this
connection can enhance the effectiveness of monetary policy and promote economic growth
in the country