Effect of Credit and Operational Risk Management on Firm Value of Deposit Money Banks in Nigeria

Abstract:

The study investigated the effect of credit and operational risks on firm value of listed deposit banks in Nigeria. The study adopted an ex-post facto research design. The target population of the study was all the deposit money banks listed in Nigeria Stock Exchange. The study used secondary sources of data from Central Bank of Nigeria as well as from annual reports and financial statement of accounts of deposit money banks under review from 2010-2019. The Structural Equation Modeling was used to test the formulated hypotheses at 5% level of significance. The findings showed that credit risk had a significant but negative effect on firm value of deposit money banks in Nigeria. Operational risk had a significant and positive effect on firm value of deposit money banks in Nigeria. The study recommends that banks should ensure that their credit exposures are adequately secured through proper scrutiny of loan processing in order to identify viable projects so as to reduce loan defaults by bank customers. They should continue to employ qualified and competent workers who are experts in banking professionalism as well as ICT competence in order to reduce unsound banking practices.