Financial Statement Analysis and Investment Decision-Making in Nigerian Deposit Money Banks
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Date
2024-12
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Lead City University, Ibadan
Abstract
Financial statement analysis is an important indicator of the capability of banks to expand growth through increased investment. Despite this, most existing studies have isolated the empirical relevance of different components of financial statements at the individual firm level. The study ascertains the determinants of investment decisions in Nigerian Deposit Money Banks; examines the effects of financial leverage on investment decisions in Nigerian Deposit Money Banks; assess the influence of liquidity ratio on investment decisions in Nigerian Deposit Money Banks; and determine the influence of gross margin on performance of Nigerian Deposit Money to examine the relevance of financial statement to investment decision of deposit money banks in Nigeria using capital structure theory. The study used secondary data of 13 deposit money banks over a period of 16 years (2005-2020) for a panel data model specified for the study. Statistical and econometric properties of the data were tested using descriptive statistics, Panel unit root tests for both homogenous and heterogenous unit roots while Hausman test was used to choose between Fixed effect and Random effect models. The specification test shows the appropriateness of the fixed effect model which was analysed through ordinary least square technique while the hypotheses of the study were also tested. The determinants of investment decision of deposit money banks are size (β = 4.52, P < 0.05), Liability (β = 4. 16, P < 0.05), equity (β = 5.65, P < 0.05), and customers’ deposit (β = 5.21, P < 0.05). The result of the hypotheses tests show that financial leverage of the banks is significantly (P < 0.005) related to investment decision of the banks while the results show that liquidity has no significant (p > 0.05) effect on investment decisions of the banks while the influence of gross margin was found to be significantly (P< 0.05) positive for investment decision of deposit money banks. The result leads to the conclusion that while none of the key ratios has significant influence on investment decision, a combination of them does. Banks should therefore combine these key ratios in addition to implementing advanced financial analytics tools and technologies while making investment decisions.
Keywords: Financial statement, Investment Decisions, Deposit Money Banks
Words: 350
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Keywords
Financial statement, Investment Decisions, Deposit Money Banks
Citation
Kate Turabia