How Domestic Debt Hurts Bank Performance:
No Thumbnail Available
Date
2012-12
Authors
Obademi, O.E
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
This study focuses on the interplay of domestic debt and bank performance and thus an attempt has been made to investigate the long-run relationship and direction of causality of the impact of domestic debt on bank performance using different variables herein the earnings per share, return on equity and return on capital employed. The banks used are the First Bank of Nigeria Plc, United Bank for Africa Plc being the two banks with huge penetration in the Nigerian banking industry. A general model for the micro analysis was developed with ample support of a macro model with the background of a simultaneous equation and further use of vector auto-regression estimation procedure. The result of the analysis shows that domestic debt impairs bank performance but the direction of impact on the two banks varies. While domestic debt impacts most negatively on the return on equity of First Bank Plc followed by its earnings per share, for United Bank for Africa domestic debt impacts most negatively on return on capital employed followed by its return on equity. It is believed that though domestic debt can be used as an instrument of economic stabilization, nonetheless, care must be taken to avoid a situation whereby it makes the business environment unfriendly.
Description
Staff Publication
Keywords
Domestic Debt , Bank Performance
Citation
Obademi,O.E. (2012) How Domestic Debt Hurts Bank Performance: A Micro Analysis. Australian Journal of Business and Managernent Research. Vol. 2, (08), p. 7 - 17.