ABSTRACT
One of the key issues faced by Deposit Money Banks is that of liquidity which arises as a result of poor decisions regarding the right mix of assets and liabilities used in financing the business. The purpose of this study was to examine how asset-liability-mix of DBMs in Nigeria affect their financial performance. Specifically, we examined the relationship between cash and cash equivalents; loans and advances; other assets; deposits; and other liabilities and financial performance. Employing the descriptive and correlational design approaches we surveyed all the 22 DMBs in Nigeria. Secondary data was obtained from the Statistical Bulletin of the CBN and analyzed using statistical cost accounting OLS model to examine the relationship between asset-liability-mix and financial performance. The study established significant positive relationships between cash and cash equivalents; loans and advances; and other assets, on one hand, and financial performance, on the other. Deposits had insignificant positive relationship, while other liabilities had insignificant negative relationship with financial performance. It was recommended that bank directors and managers should closely monitor asset and liability levels and quality by ensuring strict compliance with the CBN Prudential Guidelines, Circulars, and bank specific risk thresholds as a means of achieving optimal asset-liability-mixes for enhanced financial performance; and the CBN should occasionally tinker with the regulatory policy requirements towards a more convenient environment to enhance bank performance.
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Key words: Asset-liability-mix; Financial performance; Deposit Money Banks; Nigeria.