Capital Adequacy and Financial Growth of Listed Deposit Money Banks in Nigeria

Abstract

This study examines the relationship between capital adequacy and Nigeria’s financial growth, utilizing panel data from 12 listed deposit money banks spanning the period from 2014 to 2023. The study adopts an ex-post facto research design and utilizes secondary data sourced from the Nigerian Exchange Group and the Central Bank of Nigeria (CBN) Statistical Bulletin. Financial growth is proxied by earnings per share (EPS), while the explanatory variables include Capital Adequacy Ratio (CAR), Paid-Up Share Capital (PUSC), and Share Premium (SP). Using fixed effect model regression and relevant diagnostic tests, the findings indicate that CAR has a negative but statistically insignificant effect on EPS, while both PUSC and SP exert statistically significant negative effects on EPS. The results suggest that increases in equity capital components may not necessarily enhance financial growth in listed DMBs. The study concludes that capital adequacy elements should be more efficiently managed to optimize shareholder value. It recommends that banks review their capital structure strategies to ensure that capital accumulation directly supports profitability and shareholder returns.