MODERATING ROLE OF OPERATING ENVIRONMENT IN THE RELATIONSHIP BETWEEN LIQUIDITY RISK AND FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

Abstract

The research analyzed the influence of liquidity risk and inflation rate on the financial performance of Nigeria's listed Deposit Money Banks (DMBs) for ten years (2009-2019). Using the ex-post facto research approach to secondary data, a sample size of 12 deposit money institutions that were publicly traded on the Nigerian Stock Exchange was selected. Panel regression analysis which was used in this investigation indicated that liquidity risk has no substantial impact on the return on equity, according to the research. Furthermore, it was shown that during the study period, the rate of inflation had no significant moderating influence on the link between liquidity risk and deposit money bank financial performance. The research concluded that commercial banks should place a greater emphasis on other external environmental forces such as GDP, interest rates, and other aspects of commercial banking that may have a substantial effect on corporate performance.