Nigerian Banks’ Specific Factors and Market Share Price Nexus: A Cointegration Approach

Shamisudeen O. Badmus, Matthew A. Abata, Yusuf A. Soyebo


In modern banking operations, reports on banks’ failure, classified loans and the size of assets, as well as erratic share-price movements, have stirred the interest of various stakeholders in Nigerian banking industry. This study investigates the long-run relationship between Nigerian banks’ specific factor and market share prices using the Pedroni cointegration approach – based on data from 11 out of 15 quoted banks between 2003 and 2015. The specified variables cointegrated for panel analysis and the observed long-run relationship were estimated using Dynamic Ordinary Least Square (DOLS). The result shows a negative relationship between return on assets and market price of shares. Thus, it is recommended that banks should initiate a bad debt reduction policy and diversify their loan portfolios to less risky sectors. Similarly, an optimum asset holding policy should be formulated by banks’ managers for easy classification of assets as either performing or relinquished ones. In addition, investors should diversify their investment holdings optimally across bank assets, non-bank assets, and government stocks.


Banks; Non-Performing Loans; Market Price; Performance.

Full Text:



. D. D. Dubey & P. Kumari. Impact of non-performing assets on stock market performance of listed bank stocks in India: An empirical assessment of how the two stocks - NPA and Share are related. IOSR Journal of Economics and Finance, pp. 16-22, (2016).

. D. Sahoo & P. Mishra. Structure, conduct and performance of Indian banking sector. Review of Economic Perspectives, vol. 12(4), pp. 235-264, (2012).

. R. S. Pradhan & A. Pandey. Bank specific and macroeconomic variables affecting non-performing loans of Nepalese commercial banks. Retrieved from 2793495, (2016).

. S. Almutair. Dynamics of the relationship between bank loans and stock prices in Saudi Arabia. International Business & Economics Research Journal, vol. 14(3), pp. 439-452, (2015).

. B. Lee & O. M. Rui. The dynamic relationship between stock returns and trading volume: Domestic and cross-country evidence. Journal of Banking and Finance, vol. 26, pp. 51-78, (2000).

. K. Chaudhuri & A. Kumar. A Markov-switching model for Indian stock price and volume. Journal of Emerging Market Finance, vol. 14(3), pp. 239-257, (2015).

. M. H. Ibrahim. Stock prices and bank loan dynamics in a developing country: The case of Malaysia. Journal of Applied Economics, vol. 9(1), pp. 71-89, (2006).

. J. P. S. Sheefeni. The impact of macroeconomic determinants on non-performing loans in Namibia. International Review of Research in Emerging Markets and the Global Economy (IRREM), vol. 4(1), pp. 612-632, (2015).

. M. Badar & A. Y. Javid. Impact of macroeconomic forces on nonperforming loans: An empirical study of commercial banks in Pakistan. wseas Transactions on Business and Economics, vol. 10(1), pp. 40-48, (2013).

.E. Svensson & A. Larsson. Value Relevance of Accounting Information- A Swedish Perspective. Gothenburg: School of Economics and Commercial Law at Gothenburg University, (2009).

.F. N. Al-Shubiri. Analysis the determinants of market stock price movements: An empirical study of Jordanian commercial banks. International Journal of Business and Management, vol. 5(10), pp. 137-146, (2010).

.S. Sharma. Determinants of Equity Share Prices in India. Journal of Arts Science and Commerce, vol. 2(4), pp. 51-60, (2011).

.P. Bhatt & J. K. Sumangula. Impact of Earning Per Share on Market Value of An Equity

Share: An Emprical Study on Indian Capital Market. Journal of Finance, Accounting and

Management, vol. 3(2), pp. 1-14, (2012).

.Andriantomo & F. Yudianti. The Value Relevance of Accounting Information at Indonesia Stock Exchange. In International Conference on Business, Economics, and Accounting, (2013).

.E. Halonen, P. Pavlovic & R. Persson. Value relevance of accounting information and its impact on stock prices: Evidence from Sweden. Journal of Contemporary Accounting & Economics, vol. 9(1), pp. 47-59, (2013).

.S. Riaz, Y. Liu & H. Khan. Exploring the relationship between market value and accounting numbers of firms in Pakistan. Asian Journal of Finance and Accounting, vol. 7(1), pp. 230-238, (2015).

.N. R. Shrestha. Non-performing loans and stock prices: A case of Nepali commercial banks. Nepal Journal of Management, vol. 4(1), pp. 92-101, (2011).

.A. L. Joseph & M. Prakash. A study on analyzing the trend of NPA level in private sector banks and public-sector banks. International Journal of Scientific and Research Publications, vol. 4(7), pp. 1-9, (2014).

.A.A. Adewale & B. Afolabi. Nigeria Deposit Money Banks’ credit administration and the incidence of bad loans: An empirical investigation. Afe Babalola University, (2010).

.O. C. Agu & B. S. Okoli. Credit management and bad debt in Nigeria commercial banks – Implication for development. IOSR Journal of Humanities and Social Sciences, vol. 12(3), pp. 47-56, (2013).

.D. K. Wangai, N. Bosire & G. Gatogo. Impact of non-performing loans on financial performance of microfinance banks in Kenya: A survey of microfinance banks in Nakuru town. International Journal of Science and Research, vol. 3(10), pp. 2073-2078, (2014).

.A. K. Srivastava & A. Srivastava. Non-performing assets and its role in India perspective (A study of public, private and foreign sector banks). Retrieved from, (2014).

.A. W. Babayemi, B. K. Asare, G. L. Onwuka, R. V. Singh & T. O. James. Empirical relationship between the stock markets and macroeconomic variables: Panel cointegration evidence from African stock markets. International Journal of Engineering Science and Innovative Technology, vol. 2(4), pp. 394-410, (2013).

.K. Hydri. Testing for stationarity in heterogeneous panel data. Econometric Journal, vol. 3, pp. 148-161, (2000).

.P. Pedroni. Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and Statistics, vol. 61, pp. 653-678, (1999).

.P. C. B. Phillips & M. Loretan. Estimating long-run economic equilibria. Review of Economic Studies, vol. 58, pp. 407-436, (1991).

.P. Saikkonen. Asymptotically efficient estimation of cointegration regressions. Econometric Theory, vol. 7, pp. 1-21, (1991).

. J. H. Stock & M. W. Watson. A simple estimator of cointegrating vectors in higher order integrated systems. Econometrica, vol. 61, pp. 783-820, (1993).


  • There are currently no refbacks.





About IJSBAR | Privacy PolicyTerms & Conditions | Contact Us | DisclaimerFAQs 

IJSBAR is published by (GSSRR).