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<p>This study examines the explanatory power of capital adequacy, asset quality, management soundness, earnings quality, liquidity and sensitivity to market risk (CAMELS) framework as well as a number of other variables on the financial soundness (measured by regulatory capital adequacy ratios) of banks in Nigeria. The findings, using ordinary least squared (OLS) regression subsequent to the establishment of no panel effects among the sampled banks, reveal the significant explanatory potentials of these bank-specific variables though some give a reversal of their prior expectations. Apart from reawakening the investors’ and depositors’ interest, the findings further have policy implications on the regulation and operation of these financial institutions. The study breaks new grounds in the measurement of capital adequacy using gross revenue ratio and leverage ratio, asset quality using income statement impairment charges for loan losses, and in the inclusion of the sensitivity to market risk most especially in the Nigerian context.</p>
</abstract>

This study examines the explanatory power of capital adequacy, asset quality, management soundness, earnings quality, liquidity and sensitivity to market risk (CAMELS) framework as well as a number of other variables on the financial soundness (measured by regulatory capital adequacy ratios) of banks in Nigeria. The findings, using ordinary least squared (OLS) regression subsequent to the establishment of no panel effects among the sampled banks, reveal the significant explanatory potentials of these bank-specific variables though some give a reversal of their prior expectations. Apart from reawakening the investors’ and depositors’ interest, the findings further have policy implications on the regulation and operation of these financial institutions. The study breaks new grounds in the measurement of capital adequacy using gross revenue ratio and leverage ratio, asset quality using income statement impairment charges for loan losses, and in the inclusion of the sensitivity to market risk most especially in the Nigerian context.

Bank-Specific Variables and Banks’ Financial Soundness: Empirical Evidence from Nigeria

Ahmad Bukola Uthman is at Department of Accounting

Mubaraq Sanni is at Department of Accounting and Finance

Zagreb International Review of Economics and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

This study examines the explanatory power of capital adequacy, asset quality, management soundness, earnings quality, liquidity and sensitivity to market risk...

Bank-Specific Variables and Banks’ Financial Soundness: Empirical Evidence from Nigeria

Published Online: May 29, 2021

Page range: 37 - 66

DOI: https://doi.org/10.2478/zireb-2021-0003

Keywords
CAMELS Framework, Capital Adequacy Ratio, Charter Value Theory, Deposit Money Bank, Nigeria

© 2021 Abdulai Agbaje Salami et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Bank-Specific Variables and Banks’ Financial Soundness: Empirical Evidence from Nigeria

Published Online: May 29, 2021

Page range: 37 - 66

DOI: https://doi.org/10.2478/zireb-2021-0003

KeywordsCAMELS Framework, Capital Adequacy Ratio, Charter Value Theory, Deposit Money Bank, Nigeria

© 2021 Abdulai Agbaje Salami et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
CAMELS Framework, Capital Adequacy Ratio, Charter Value Theory, Deposit Money Bank, Nigeria