Taiwo Adewale Muritala | Muftau Adeniyi Ijaiya | Ahmed Oluwatobi Adekunle | Mobolaji Kafayat Abidoye
JEL classification: G21; L25; O55;
Keywords: Capitalization; Bank Performance; Commercial Bank; Nigeria;
Abstract: The study examines the impact of capitalization on bank performance of some selected commercial
banks in Nigeria using econometric analysis on annual time series data of ten banks over the
period of 2006 to 2014. The results from a Levin, Lin & Chu unit root test show that all the variables
were non-stationary. The results from a Panel Least Square (PLS) estimate found that operating
expenses, bank size and bank loan are negatively related to profitability but only bank loans are
significant. On the other hand, bank deposit and bank liquidity are positively related to profitability
but not significant. This conclusion has important policy implications for emerging countries like
Nigeria as it suggests that capitalisation and total assets of a bank should be periodically evaluated.
The regulatory authorities will therefore need to put in place appropriate machinery that will address
issues of bank liquidity and assure asset quality in the industry.