ASSESSING THE EFFECT OF NON-PERFORMING LOANS ON THE PROFITABILITY OF LISTED NIGERIAN FINANCIAL FIRMS
Keywords:
Financial, Loans, Non-Performing, PerformanceAbstract
The study assesses the effect of Non-Performing Loans on the Financial Performance of Listed Nigerian Financial Firms. The specific objectives are to; Ascertain the effect of loan impairment to equity ratio Return on Capital Employed of listed financial service firms and assess the effect of total loan to total assets on Return on Capital Employed of listed financial services firms in Nigeria. The study used an ex post facto research design. Time series data from 2013 to 2022 were extracted from the audited annual reports of Nigeria's selected financial services firms. The data was described by descriptive statistics and correlation analysis was performed. The result revealed that where Loan impairment to total loan ratio has no significant but positively affected return on capital employed of listed financial service firms with a value of (P > |t| = 0.687> 0.05 and t = -0.47<|2|), while Total loans to total assets ratio exerted a significant negative relationship on return on capital employed of listed financial service firms with a value of P>|t| = 0.016< 0.05 and t-statistic > |2| at -2.43. in Nigeria. The study concluded that NonPerforming Loans have no significant positive effect on the Financial Performance of Listed Nigerian Financial Firms. The study recommended among others financial firms should strengthen their credit risk assessment processes to minimize the accumulation of non-performing loans. This includes adopting advanced credit scoring systems, stricter loan approval policies, and robust monitoring of borrower repayment capacity
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