Credit Risk Management and Financial Performance of Deposit Money Banks in Nigeria: Dividend Payout as a Mediator

Abstract

This study investigated the extent to which dividend payout mediate the relationship between credit risk management and financial performance of listed deposit money banks in Nigeria from 2012-2023. Ex-post facto research design was used and secondary data was obtained for fourteen deposit money banks. Credit risk management was proxied as capital adequacy, loanto-deposit, loan-loss provisions, and non-performing loans ratios. Data obtained were analyzed via descriptive and inferential statistical tools. In specific, the structural equation modelling results was used in ascertain how dividend payout mediates in the relationship between credit risk management and financial performance. Hence, the structural equation modelling results revealed that dividend payout plays a mediating role in the relationship between credit risk management variables and the performance of deposit money banks in Nigeria. On the basis of the findings, it recommends that deposit money banks’ management are further encouraged to continue with the current dividend policy decisions; the policy should be targeted at finding novel ways of attracting more capitals/investors that can mitigate against non-performing loans and in increasing capital adequacy ratio.