SHAREHOLDERS’ WEALTH MAXIMISATION AND DEPOSIT BANKS’ PERFORMANCE IN NIGERIA

Abstract

The study examines how the performance of Nigeria's deposit money banks was impacted by shareholders' desire to maximize wealth over the period from 1996 to 2020. The 2020 Statistical Bulletin of the Nigerian Central Bank served as the primary source for secondary data. Shareholder’s wealth maximization of deposit money banks’ that are quoted in Nigeria Stock Exchange was used as a proxy for dividend and adopted as the response variable; while, earnings per shares. ratio of dividend payout, dividend yields and retention ratios, are use as explanatory variables to determine deposit money banks ‘performances. The formulated hypotheses were tested by time series econometric techniques. The results indicate that the payout ratio for dividends has an effect that is significant and positive on deposit money banks’ market value in Nigeria. That ratio on retained earnings has a positive effect that is significant on Nigeria’s deposit money banks’ market value. The yield on Dividend shows a significantly positive effect on deposit money banks’ market value in the country. There was also a significant but positive influence on deposit money banks market value by earnings per shares for Nigeria. The derived model’s coefficient of determination shows that that about 62 per cent of shareholders’ wealth maximization variations are due to variations in proxies of DMB’s performance in Nigeria as adopted in this study (DPR, RR, DY, EPS).The perceived consequences from the findings of this study is that shareholder’s wealth maximization impacts significantly on DMB’s performance in Nigeria. Drawing from on the foregoing this research makes the following recommendation; that regulatory oversight functions of the country’s regulatory authorities have to be enhanced in order to attain for the banking sector transparency, good business ethics and acceptable corporate governance. The result will be a reduction in fears of investors and frequent declaration of mind blowing profits that are at variance the real situation of the banks, eliminating insider trading, and the deliberate manipulation of the price of stocks.