Impact of Debt and Equity Financing on the Profitability of Deposit Money Banks in Nigeria
Impact of Debt and Equity Financing on the Profitability of Deposit Money Banks in Nigeria

Summary/Abstract: The present investigation examined the influence of debt and equity financing on the profitability of Nigeria’s deposit money banks, focusing on a sample of ten banks that were traded on the Nigeria Exchange Group between 2018 and 2023. The factors analyzed were retained earnings, share capital, long-term debt, and short-term debt. Several statistical and economic methods were adopted to analyze the data. The outcomes demonstrated that short-term debt and profitability had an adverse and insignificant connection. Likewise, it was noted that retained earnings and long-term debt had a detrimental and statistically negligible effect on profitability. Despite the positive association between share capital and profitability, it was insignificant. The research concluded that both debt forms, short-term and long-term and retained earnings have no significant implications on profitability of deposit money banks in Nigeria. In contrast, share capital, while positively related to profitability, did not exhibit statistical significance. Following these outcomes, the research recommended that banks minimize reliance on both short-term and long-term debt as sources of finance, given their negative effects on profitability. It is also suggested that banks focus more on increasing share capital and reconsider their retained earnings strategies for more efficient allocation towards high-yield investments.

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