Trading on Equity and the Financial Performance of Deposit Money Banks Listed on the Nigeria Stock Exchange

Abstract

This study examines the effect of trading on equity on the financial performance of deposit money banks listed on the Nigeria Stock Exchange. The study utilizes an ex-post facto research design using panel data regression model covering the study period of ten years spanning from 2010 to 2019. Population of the study is the 22 deposit money banks listed on the Nigeria stock exchange from which a sample of 7 was drawn using purposive sampling technique.The dependent variable of the study is the financial performance measured by ROA and ROE while the independent variables are the trading on equity measured by debt to asset, debt to equity with a control variable as equity to asset. The finding of the study revealed that debt to asset and equity to asset has significant effect on the ROA while debt to equity has no significant effect on the ROA. The finding further indicated that debt to asset has significant effect on the ROE while debt to equity and equity to asset has no significant effect on the ROE. The finding therefore concludes that debt to asset and equity to asset are the major determinants of financial performance of the DMBs. The study recommends therefore that DMBs should utilize both debt with minimal cost of capital and equity as major sources of financing their operations.