Financial Risk and Profitability: Evidence from Liquidity Risk Exposure, Long-Term and Short-Term Liquidity Risk
A. Kolawole Adegoke *
Department of Banking and Finance, Achievers University, Owo, Ondo State, Nigeria
O. Yusuf Oyedeko
Department of Banking and Finance, Achievers University, Owo, Ondo State, Nigeria
*Author to whom correspondence should be addressed.
Abstract
The study examines the effect of liquidity risk exposure, long-term and short-term liquidity risk on the profitability of Deposit Money Banks. Expos-facto research design was used for the study. The study employed secondary data, sourced from the audited financial reports of the banks within the period of the study spanning from 2007 to 2016. The data were analyzed through panel data regression analysis. The study found that liquidity risk exposure has negative and insignificant effect on profitability of Deposit Money Banks. The study concluded that both short-term and long-term liquidity risk have positive effect on the profitability of deposit money banks. In view of this, the study recommends that the management of Deposit Money Banks should maintain short, medium and long-term cash forecasts in order to forestall problem of illiquidity and reduce liquidity risk.
Keywords: Liquidity risk exposure, long-term liquidity risk, short-term liquidity risk, deposit money banks, profitability