SOURCE:

Faculty: Management Sciences
Department: Accountancy

CONTRIBUTORS:

Osemwegie-Ero, O. J;
Okafor, R. G;

ABSTRACT:

Considering that about sixty-four percent of the current fourteen deposit money banks quoted in the Nigeria Stock Exchange are into cross-border banking, there is need to evaluate their performances vis-à-vis their domestic counterparts. The unresolved empirical evidence as to whether or not the Nigerian cross-border banks are more profitable than the local banks, as well as the extent to which cross border bank explains the variation in bank profitability and stock performance – formed the core motivations behind this study. The objective of this study, therefore, is to examine the effect of cross border bank on the performance of deposit money banks in Nigeria. The census method was employed by sampling the entire fourteen (14) quoted deposit money banks as at year ended 2016. Secondary financial data were extracted from the annual financial statements of the banks for a period of sixteen (16) years (2001-2016). The study evaluated the banks’ performances using three (3) performance indicator metrics – profitability, liquidity and stock price. The study employed the use of graphs, descriptive statistics, correlation matrix, multivariate (panel regression) and paired sample t-test for the data analyses. The findings showed that the cross-border banks have significantly higher stock performance in 2009 – 2016, the post cross border periods, while their profitability and liquidity ratio did not differ significantly before 2001 – 2008 (pre) and after (post) engaging in cross border. Similarly, on the comparison of cross border and domestic banks, the cross border banks performed significantly better stock-wise, while both performance in terms of profitability and liquidity were statistically not different. On the panel data estimation, the study found that cross border bank activities have a positive and significant relationship with bank profitability, while its effect on stock price was also positive but not statistically significant. The study recommends, among others, that the management of cross-border Nigerian banks should sustain their presence in foreign countries where they are more profitable in order to maximize their risk diversification potentials and the overall performance of the bank.