Authors :
GbengaI .Olorunsola; Emmanuel EmekaOwoh
Volume/Issue :
Volume 8 - 2023, Issue 3 - March
Google Scholar :
https://bit.ly/3TmGbDi
Scribd :
https://bit.ly/42CgwdZ
DOI :
https://doi.org/10.5281/zenodo.8296726
Abstract :
The study used conceptual narrative(s)/meta-narrative(s) procedure to review the researchers’
empirical work and draw some conclusions on the relationship between Credit Risk Management and
the performance of banks in Nigeria.
Several variables such as Return on Assets, Return on Equity, and Economic Value-Added were
used by most researchers as a proxy for Performance, while variables like Non-performing Loan
ratio, Impairment Charges, Capital Adequacy ratio, Asset Quality, Firm size, Financial Leverage,
Management Quality, and Liquidity were used as a measure of Credit Risk Management.
While there is a consensus that loan loss provision and Impairment Charges have a negative
relationship to performance (ROA) for most researchers such that the higher the loan losses, the
lower the financial performance and vice versa. Most of the researchers agree that there is a positive
relationship between Capital Adequacy Ratio and banks’ performance. This presupposes that the
more capital is available to the bank, the more credit exposure will increase. However, the profit
maximization expectations should be moderated by the risk appetite defined by the banks so that loan
impairment can be contained given the information asymmetry and moral hazards that attain a credit
decision.
It is noted that while there is consensus in the findings, there is a need to expand the variables to
include Nigeria-specific ones like Loan-to-deposit ratio and Cash Reserve requirement. These are
currently significant phenomena in the Nigerian banking industry and will afford researchers the
opportunity to recommend policy adjustments to ensure a sustainable economy.
The study used conceptual narrative(s)/meta-narrative(s) procedure to review the researchers’
empirical work and draw some conclusions on the relationship between Credit Risk Management and
the performance of banks in Nigeria.
Several variables such as Return on Assets, Return on Equity, and Economic Value-Added were
used by most researchers as a proxy for Performance, while variables like Non-performing Loan
ratio, Impairment Charges, Capital Adequacy ratio, Asset Quality, Firm size, Financial Leverage,
Management Quality, and Liquidity were used as a measure of Credit Risk Management.
While there is a consensus that loan loss provision and Impairment Charges have a negative
relationship to performance (ROA) for most researchers such that the higher the loan losses, the
lower the financial performance and vice versa. Most of the researchers agree that there is a positive
relationship between Capital Adequacy Ratio and banks’ performance. This presupposes that the
more capital is available to the bank, the more credit exposure will increase. However, the profit
maximization expectations should be moderated by the risk appetite defined by the banks so that loan
impairment can be contained given the information asymmetry and moral hazards that attain a credit
decision.
It is noted that while there is consensus in the findings, there is a need to expand the variables to
include Nigeria-specific ones like Loan-to-deposit ratio and Cash Reserve requirement. These are
currently significant phenomena in the Nigerian banking industry and will afford researchers the
opportunity to recommend policy adjustments to ensure a sustainable economy.
