Browsing by Author "Etudaiye-Muhtar, Oyebola"
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Item Capital Structure: A Systematic Review of Theories and Concepts(Department of Finance, University of Ilorin, 2018) Etudaiye-Muhtar, OyebolaCapital structure is one of the main issues and key financial decisions in corporate finance. Extant literatures on capital structure show that the debt-equity mix of a firm affects its cost of capital and hence, the firm value implying that a firm would need to adopt the capital structure that maximises its value while resulting in cost minimisation. Based on this, the present study extensively reviews the various theories and conceptual framework that have been used in literature to explain capital structure of firms. The study also discusses the issue of target capital structure, adjustment costs and speed of adjustment; a recent development in the field of capital structure studies. The paper concludes that the various theories are not mutually exclusive, thus, for researchers to solve the capital structure puzzle, there is a need to consider the several factors involved in explaining a firm’s capital structure.Item THE DETERMINANTS OF DEBT MATURITY STRUCTURE IN NIGERIAN FIRMS(2013) Etudaiye-Muhtar, OyebolaThe adoption of an appropriate debt maturity structure by firms among other reasons, enables the prevention of adverse effects on firm value and cost of capital, allows alignment of liabilities to assets and addresses underinvestment problems. In view of these reasons, this study investigates the determinants of debt maturity structure for a sample of 59 nonfinancial firms in Nigeria for the period, 2003-2012. Using an instrumental variable technique, the study finds that lagged debt maturity structure, profitability, leverage, and asset structure exhibit a positive relationship with debt maturity, while growth opportunity has a negative relationship with debt maturity. The results are robust to endogeneity and serial correlation issues that are common with dynamic panel studies. The findings are in support of the contracting/agency cost theory, signalling theory and matching principle of debt maturity structure.Item Do Sukuk Financial Instruments mirror Conventional Bonds?(2015) Etudaiye-Muhtar, Oyebola; Matemilola, BolajiItem Economic Downturn and Credit Risk: Empirical Evidence from the Nigerian Banking Sector(2018) Abdurraheem, Abdulazeez; Abdulkadir, Rihanat; Etudaiye-Muhtar, OyebolaThis paper investigates the impact of the economic downturn on the credit risk of the Nigerian banking sector using quarterly data for the period 2007 -2016. The study employs ARDL (Autoregressive Distributed Lag) approach to cointegration. The study also conducted causality test using the Modified Wald (MWALD) test proposed by Toda and Yamamoto (1995) to determine the direction of causality among the variables. The results provide empirical support for the existence of a long-run relationship between the credit risk of Nigerian Banks and macroeconomic variables, namely GDP growth, interest rate, inflation and foreign exchange rate. Most importantly the study finds greater causality power of interest rate, inflation and foreign exchange rate over the credit risk of Nigerian Banks during the study period. The findings of the study have important implications for the impact of the macroeconomic factors on the quality of risk assets of the bank. One practical implication for Nigerian Banks, is the integration and assessment of the potential impact of the macroeconomic environment into the evaluation and assessment mechanism of the quality of their risk asset portfolio. Similarly, in order to mitigate another round of banking crisis and therefore a financial system instability in the country, the government and monetary authority should therefore, work to harmonise the government fiscal policies and the monetary policies with a view to reducing the interest rate, inflation and exchange rate in order to reduce the negative impact of volatile macroeconomic environment on the risk assets of the banking sector.Item An Empirical Investigation of the Link between Financial Depth and Savings Mobilisation in Nigeria(2019) Etudaiye-Muhtar, Oyebola; Agboola, IfeoluwaAn efficient and well-developed financial sector is important for mobilising domestic savings to deepen the financial sector, enhance economic growth as well as reduce poverty in any economy. To examine the extent to which deepening of the financial sector is important for savings mobilisation in Nigeria, this study used the Autoregressive Distributed Lag bounds testing technique for co-integration on a set of time series data for the period 1987 to 2017. In addition, the Toda and Yamamoto Granger non-causality test was used in determining the causality direction. The study found the existence of a long-run relationship between financial depth and savings mobilisation and a uni-directional causality from financial depth to savings mobilisation. These findings imply that financial sector deepening is important in order to increase domestic savings. Therefore, it was recommended that financial sector intermediaries (banks in particular) should increase the depth of the financial sector through efficient credit monitoring to the private sector, for increased productivity and investments which would in turn, encourage greater savings. In addition, the gap between savings and lending rate should be reduced to encourage more savings.Item THE LINEAR EFFECT OF BANK LIQUIDITY ON PROFITABILITY IN SELECTED AFRICAN ECONOMIES(2018) Etudaiye-Muhtar, Oyebola; Bamigbade, Dayo; Fagbemi, Temitope; Abdurraheem, AbdulazeezGiven the importance attached to sound liquidity management in the banking industry, this paper investigates the effect of bank liquidity on profitability. The study employs the bankruptcy cost and risk-return hypotheses to examine the linear effect of bank liquidity on bank profit. Annual bank-specific data from commercial banks in Kenya, Nigeria and South Africa, for the period 2000-2014, are used in the study. The two-step system generalised method of moments technique of analysis, an instrumental variable technique that addresses issues such as endogeneity, reverse causality and auto-correlation, is used for the investigation. The results revealed a statistically significant and positive relationship between liquidity and bank profit indicating the applicability of the bankruptcy cost hypothesis. This implies that banks in the study benefit from reduced financial distress and funding costs thereby increasing profits. The study thus recommends that commercial banks in the selected countries hold higher levels of liquidity to mitigate the risk of failure and increase profit.Item Microeconomic and Macroeconomic Determinants of Bank Profitability in Nigeria(2017) Etudaiye-Muhtar, Oyebola; Abdulkadir, Rihanat; Gold, LolaDevelopment of the banking sector and increasing importance of banks’ role in the economy has significantly led to an increase in bank-focused literature. To this end, this study investigated microeconomic (bank specific and industry-specific) and macroeconomic determinants of bank profitability in 16 Nigerian commercial banks for the period 2010 - 2014. Using the Pooled Ordinary Least Squares regression method, microeconomic factors (credit risk, capital adequacy, cost management efficiency, liquidity, size and market structure) and macroeconomic factors (gross domestic product and inflation) were regressed against two measures of bank profitability (net interest margin and return on average assets). The results indicated that size, cost management efficiency, bank liquidity and market structure are significant microeconomic determinants of Nigerian commercial banks’ profits while gross domestic product and inflation are the significant macroeconomic determinants with microeconomic factors having a higher explanatory power. Based on the findings, the study recommended that for Nigerian commercial banks’ earnings to improve, they should maintain a low cost profile, low liquidity level as well as growth in their operations. For policy makers and regulators in the industry, we recommended the sustainment of a low inflationary environment as well as growth in the economy for bank earnings to increase.