EFFECT OF DEBT UTILIZATION ON FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study investigates the effect of debt utilization on financial performance of deposit money banks (DMBs) in Nigeria from 2014 to 2023. Using a quantitative research design and secondary data from eight DMBs, the study examines the relationship between debt-to-equity and debt-to-assets ratios and bank value measured by return on equity (ROE) and return on assets (ROA). The findings reveal that the debt-to-asset ratio positively and significantly affects financial performance, while the debt-to-equity ratio has no significant impact. The study concludes that optimizing the debt-to-equity ratio has no significant impact. The study concludes that optimizing the debt-to-asset ratio is crucial for improving financial performance. The study recommends effective debt management, diversifying funding sources, continuous monitoring of financial leverage and performance, and regulatory oversight to promote a sustainable banking sector.