Profitability and Share Price of Listed Deposit Money Banks in Nigeria

Abstract

Volatility of share prices (SPR) of listed Deposit Money Banks (DMBs) in Nigeria is a major concern to investors because they often suffer huge losses as against their expectations. Share prices  volatility can result to low returns and increase uncertainty of future returns to investors. Thus, investors need information disclosed by management in  the  annual reports of DMBs to make investment decisions, therefore, this study investigated the impact of profitability on SPR of listed DMBs in Nigeria.  The study utilised an ex post facto research design. The population of the study consists of all listed DMBs on the Nigerian Exchange Group (NGX). Purposive sampling technique was used to select 10 listed DMBs having the required data for the study from 2015 to 2024. The results of the Feasible Generalized Least Squares (FGLS) analysis revealed that the influence of return on assets (ROA) on SPR was positive and significant, while return on equity (ROE) has an insignificant positive influence on SPR. The study concluded that Profitability, represented by ROE and ROA,  altogether significantly affects the SPR of listed  DMBs in Nigeria. The study recommended that management of DMBs in Nigeria should boister ROA by managing bank assets efficiently in other to generate more profits from assets which will reinforce investor trust and driving up share demand thereby resulting in share price appreciation, and investors should take into consideration ROA, an indicator of profitability when conducting in-depth research before investing in shares of DMBs in Nigeria
Keywords: Deposit money banks; profitability; return on assets; return on equity; share price.