ABSTRACT

The main objective of this study is to determine the effect offinancial risk management on financial performance of deposit money banks in Nigeria over a period oftwelve (12) years (2008-2018)forthefour(4) selected banks. This work employed three (3)financialriskvariables for the independent variables such as: debt-to-asset ratio (DR); debt-equity ratio (DER) and interest coverage ratio (ICR) in determining their effect onfinancialperformance for Return on Assets (ROA), Return on Equity and Return on investment (ROI) as dependent variables. The expostfacto research design was usedfor this study. The secondary data were obtainedfrom the financial statements (Comprehensive income statement and Statement offinancial position) of the selected banks. Descriptive statistics, Panel regressions were employed and usedfor this study. The results ofthe analysis showed that Interest cover has significant positive effect on return on asset of the sampled banks, while debt-equity ratio and debt-to-assets ratio have insignificant negative effect on return on asset of the sampled banks, Interest cover hassignificant positive effect on return on equity ofthe sampled banks, debt-equity ratio hassignificant negative effect on return on equity while debt-to-assets ratio has significant positive effect on return on equity ofthe sampled banks, Interest cover has significantpositive effect on return on investment ofthe sampled banks, debt-equity ratio has insignificant negative effect on return on investment while debt-to-assets ratio has insignificant positive effect on return on equity ofthe sampled banks. Based on the above findings, the researchers now recommend that commercial banks’ management should ensure that financial decisions made by them are in consonance with the shareholders’ wealth maximization objectives which encompasses the profit maximization , objective ofthefirm. The amount ofdebtfinance in the financial mix ofthe firm should be at the optimal level so as to ensure adequate utilization ofthe firms’ assets. The management should also monitor the interest charged on debtfinancing to avoid liquidation ofthe company.