Abstract: Banking system all over the world remains the pivot upon which the economic engine of any nation revolves hence the quest for it to be adequately capitalized for its smooth operational efficiency. The issue of bank capitalization has attracted many empirical studies due to its indispensable role in banking operations throughout the world. The general objective of the paper is to examine the effect of capital adequacy on the operational efficiency of Nigerian banks. Relevant theoretical foundations have been drawn from the Stakeholders’ and Capital Adequacy theories. The study population is made up of 15 DMBs where secondary data were collected from the annual reports and financial statements of the banks for 10 years from 2007-2016. Quantitative research design was employed by the study hence data collected were analyzed using both descriptive and inferential statistics. Ordinary least square method employed and relevant diagnostic tests conducted to ensure the goodness of fit of the model. Findings revealed that capitalization of banks should be a continuum having been found to be statistically significant to operational efficiency of banks (p-value = 0.000<0.05). Banks should meet the minimum capital base all the time to be able to perform its statutory role of financial intermediation and remain financially stable to withstand both internal and external shocks within the financial system. Regulatory compliance with the capital adequacy for banks as stated by Basel Accord must be taken seriously by all the banks and regulatory agencies so as to engender sound financial system stability.
Keywords: Capital adequacy, Banking system, Financial intermediation, Banking operations.
Title: CAPITAL ADEQUACY AND BANK’S OPERATING EFFICIENCY IN THE NIGERIAN BANKING INDUSTRY
Author: Tajudeen Tewogbola Lawal, Professor Willy Muturi, Oluoch Oluoch
International Journal of Management and Commerce Innovations,
ISSN 2348-7585 (Online)
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