FINANCIAL RISK AND FLEXIBILITY IN NIGERIAN DEPOSIT MONEY BANKS: AN EMPIRICAL STUDY

Abstract

This study examines the effect of financial risk on the financial flexibility of Deposit Money Banks (DMBs) in Nigeria. Using an ex-post facto research design, secondary data were extracted from audited financial reports of selected banks over a ten-year period (2007–2016) and analyzed through panel data regression techniques. Findings indicate that funding liquidity risk has a positive but statistically insignificant effect on financial flexibility, whereas solvency risk exerts a significant negative impact. The study concludes that the financial flexibility of banks is influenced by both liquidity and solvency risks, reflecting their capacity to meet financial obligations. Based on these findings, it is recommended that DMB management focus on expanding the customer base and enhancing the frequency of deposits through improved financial services, thereby strengthening daily capital levels and enhancing overall financial flexibility.