Effect of Liquidity Management on Financial Performance of Listed Deposit Money Banks in Nigeria

Abstract

This study examined the effect of operating cash flow ratio and deposit to total asset ratio on financial performance of listed deposit money banks in Nigeria. Financial performance was measured by return on assets. An ex post facto and causal research design was adopted, using panel data obtained from the audited annual reports of thirteen deposit money banks listed on the Nigerian Exchange Group for the period 2015–2024. The study employed a census sampling technique, resulting in a balanced panel of 130 observations. Data were analyzed using descriptive statistics, correlation analysis, and panel regression techniques. Based on the Hausman test results, the random effects regression model was adopted, and hypotheses were tested at the 5% level of significance. The findings revealed that operating cash flow ratio, and deposit to total asset ratio have significant positive effects on return on assets. The study concludes that effective liquidity management significantly enhances the financial performance of deposit money banks in Nigeria. The study recommends that bank management should strengthen operating cash flow generation, intensify deposit mobilization and sustain adequate liquidity levels to enhance profitability and financial stability. Future studies may extend the scope by incorporating additional liquidity indicators, alternative performance measures, and broader institutional coverage.