CAPITAL STRUCTURE OF SICK BANKS AND IMPLICATIONS ON CORPORATE PERFORMANCE AND LOAN RECOVERY: AN EMPIRICAL EVIDENCE FROM NIGERIA’S DEPOSIT MONEY BANKS
The study investigated capital structure of sick banks in Nigeria and the impacts on corporate performance and loan recovery from 2012-2021.The population of the study comprised twenty-four(24) Deposit Money Banks listed on Nigerian Stock Exchange(NSE) of which three (3) have been adjudged to be sick by the regulatory body. Secondary data were obtained from the Nigerian Stock Exchange (NSE) Fact Books and the banks' Audited Annual Financial Statements for the period covered by the study. Panel pooled ordinary least square estimation technique was adopted in analysing the data. Results showed highly geared capital structure among the sick banks with a high profile of non-performing loans which negatively affected corporate performance. It also revealed that the banks could not maintain an independent diversified loan portfolio devoid of executive interference. Excessive loan concentrations aggravated the banks’ liquidity and solvency appraisals. The findings clearly revealed that the banks experienced sharp declines in most of the vital ratios which snowballed poor performance and poor loan recovery. The study concluded that the capital structures of sick banks has a direct negative relationship with corporate performance and loan recovery which significantly influenced by the degree of debt financing. The study therefore recommended that balancing the capital optimal mix of sick banks is an anti-dose to an improved corporate performance and recovery of operational loans of the banks in Nigeria.
Capital Structure, Sick Banks, Corporate Performance, Loan Recovery, Pooled Ordinary Least Square Estimator.