CREDIT RISK FACTORS AND FIRM VALUE OF DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study examines the effect of credit risk factors on firm value among listed Deposit Money Banks (DMBs) in Nigeria using an eleven-year panel dataset (2013–2023). Employing a Panel Generalized Least Squares (PGLS) model to address heteroskedasticity and serial correlation, the findings reveal that the Trade Receivables Composite Quality Index (TRCQI) significantly and negatively impacts firm value, while Receivables Turnover (RT) and Cash Holdings (CH) also exhibit significant negative effects. In contrast, the Non-Performing Loan Ratio (NPLR) and Loan Loss Provisions (LLP) show insignificant effects. The results underscore the importance of maintaining high-quality receivables, balanced credit recovery practices, and optimized liquidity management to enhance market valuation. The study recommends rigorous credit risk assessment, proactive monitoring of loans, forward-looking provisioning, customer-focused receivables management, and strategic liquidity deployment to strengthen shareholder value and overall bank performance.