The Impact of Bank Size on the Performance of Nigerian Deposit Money Banks

Abstract

Bank size remains an important but unsettled determinant of bank performance, particularly in a financial system shaped by consolidation, digitalisation, and changing regulatory requirements. This study examined the impact of equity capital, bank size, loan assets, and deposit liabilities on the performance of selected Nigerian Deposit Money Banks, measured by return on assets. The analysis focused on five Tier-1 banks and used quarterly panel data covering 2014Q1–2024Q4, yielding 220 bank-quarter observations. Descriptive statistics, correlation analysis, conventional static panel estimators, and diagnostic tests were applied. Following evidence of heteroscedasticity, serial correlation, and cross-sectional dependence, the Panel-Corrected Standard Errors estimator was used for the principal regression analysis. The results show that equity capital has a positive and statistically significant relationship with return on assets (coefficient = 1.2312, p < 0.01). Bank size has a negative and statistically significant relationship with performance (coefficient = -4.5039, p < 0.01), while loan assets (coefficient = 1.3261, p < 0.01) and deposit liabilities (coefficient = 2.9369, p < 0.01) are positively associated with return on assets. The model explains approximately 70.35% of the variation in return on assets. The findings indicate that expansion in asset size alone is not associated with improved performance and that capital strength, credit intermediation, deposit mobilisation, and efficient resource management remain important to the performance of the sampled banks.