Leverage and financial performance: a study of selected listed deposit money banks in Nigeria

This paper focused on Leverage and Financial Performance, using a study of Selected Listed Deposit Money Banks in Nigeria, Deposit Money Banks tend to employ unordinary strategy in order to survive in the competitive environment. The most common method for banks to earn higher profit is to engage in high risk business activities as such this research investigated the relationship that exists between Leverage and Financial performance of Listed Deposit Money Banks in Nigeria. This study adopted a historical research design and ex post facto research design. The study also utilized panel data which simultaneously combines cross-sectional and time series data. The population of this study will consist of Thirteen (13) Deposit Money Banks, quoted in Nigeria (NSE, 2019). Using simple random sampling technique 5 Deposit Money Banks were selected. The study conducted a descriptive analysis and Ordinary least Square (OLS) regression technique and correlation was adopted to examine the relationship that exists between Financial Leverage and Financial performance. The result shows that Debt ratio (DR) has an insignificant positive relationship with Return on Assets (ROA) as indicated by the beta value of (0.345) and p-value of (0.058>0.05). There is a negative and significant relationship between Debt-equity ratio (DER) and Return on Assets as indicated by the beta value of (-0.016) and significant value of (0.010<0.05). The result also shows that Interest coverage ratio (ICR) has a positive and insignificant relationship with Return on Assets as indicated by the beta value of (0.004) and significant value of (0.096>0.05). On these grounds, the study concluded that there is a significant relationship between Leverage and Financial Performance of listed Deposit Money Banks in Nigeria. The study recommends that Deposit Money Banks management should ensure that financial decisions made by them are in consonance with shareholders’ wealth maximization objectives which encompasses the profit maximization objective of the firm.