DOES BANKS' LIQUIDITY GRANGER CAUSE ITS CAPITAL STRUCTURE IN NIGERIA: A PANEL GRANGER TREATMENT?

A. S. Yunisa, U. E. Oki

Abstract


The study examined the effects of Deposit Money Banks' liquidity on
capital structure in Nigeria. The objectives of the study were to examine
the effects of banks' financing mix on its liquidity; and secondly, to investigate the existence of bi-directional relationship between banks' capital structure and its liquidity in Nigeria. The study adopted a survey research design and used secondary data collected from the audited annual reports of fourteen (14) sampled banks for the period 2005 - 2016. Data collected was analyzed using Generalised Least Square statistical technique. Specific findings showed that the financing mix of sampled banks has significant effect on their liquidity in Nigeria. Also, that capital structure has an inverse bi-directional relationship with liquidity of sampled banks. The study recommends that CBN should further increase the equity capital of Deposit Money Banks from ? 25 Billion to ? 33.125 Billion. This increment will further strengthen CBN's objectives of ensuring the stability of the financial system and safety of depositor's funds. An increase in the equity capital of Deposit Money Banks will positively affect (improves) their liquidity.

Keywords


Capital structure, Liquidity, Deposit Money Banks, and Granger Causality

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International Journal of Management Science Research ISSN ISSN 2536 – 605X(Print)

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