Global Journal of Economic and Finance Research

This study examined the effect of market risk on the return on shareholder’s fund of deposit money banks in Nigeria over a 14-year period (2010-2023). The research employed econometric techniques such as the ordinary least square method, descriptive statistics, and post-estimation diagnostics to analyze the relationship between market risk and return on shareholder’s fund of deposit money banks in Nigeria. Return on shareholder’s fund (RSF) was used as the indicator for financial performance, while inflation rate, interest rate, and exchange rate were used as proxies for market risk. Findings indicated that the inflation rate had a negative but statistically insignificant effect on RSF (β = -0.615666, p = 0.5658). The interest rate had a positive but statistically insignificant effect on RSF (β = 0.446195, p = 0.2294), and the exchange rate had a positive but statistically insignificant impact on RSF (β = 1.301086, p = 0.0876). The coefficient of determination (R²) indicates that about 38% of the variation in the return on shareholder’s fund of Nigerian deposit money banks can be explained by the inflation rate, interest rate, and exchange rate. The remaining 62% of the variation is due to other factors not accounted for in the model. The Durbin-Watson statistic of 2.264529 points to no potential autocorrelation in the model, suggesting that a significant portion (62%) of the variables affecting return on shareholder’s fund are missing from the analysis. The study concluded that market risks variables do not have a significantly effect on the return on shareholder’s fund of Nigerian deposit money banks. Based on these findings, it is recommended that banks should adopt more proactive strategies in identifying and managing market risks to reduce exposure and improve overall financial performance (RSF) of deposit money banks in Nigerian.

Market Risk, Deposit Money Banks in Nigeria, Return on Shareholder’s Fund, Inflation Rate, Interest Rate, Exchange Rate.

1. Adesugba, A. K., & Bambale, A. J. (2016). The effects of credit risk management on the performance of selected deposit money banks in Nigeria. International Journal of Management and Commerce Innovations, 4(1), 73–83.
2. Ajaja, O. B., & Adebayo, A. O. (2025). Cash reserve ratio and return on shareholders’ fund in Nigerian deposit money banks. International Journal of Research Publication and Reviews, 7(5), 3219–3224.
3. Alajekwu, B. U., Okoro, C. O., Obialor, M. C., & Ibenta, S. N. (2017). Effect of investor sentiment on future returns in the Nigerian stock market. International Journal of Trend in Scientific Research and Development, 1(5), 140–154.
4. Amenawo, I. O., Rima, H. B., & Akpan, E. S. (2016). Foreign exchange fluctuations and the profitability of deposit money banks in Nigeria. Research Journal of Finance and Accounting, 7(18), 121–126.
5. Aruwa, S. A., & Musa, O. A. (2014). Risk components and the financial performance of deposit money banks in Nigeria. International Journal of Social Sciences and Entrepreneurship, 1(11), 18.
6. Aboli, G. (2015). 8 risks in the banking industry faced by every bank. Retrieved from https://gomedici.com/8-risks-in-the-banking-industry-faced-by-every-bank/
7. Ayinuola, T. F., & Gumel, B. I. (2023). The nexus between liquidity and credit risks and their impact on bank stability. Asian Journal of Economics, Business and Accounting, 23(11), 15–27.
8. Campbell, A. (2007). Bank insolvency and the problem of nonperforming loans. Journal of Banking Regulation, 9(1), 25–45.
9. Das, A., & Ghosh, S. G. (2007). Determinants of credit risk in Indian state-owned banks: An empirical investigation. Economics and Statistics, 58(2), 355–372.
10. Ekinci, A. (2016). The effect of credit and market risk on bank performance: Evidence from Turkey. International Journal of Economics and Financial Issues, 6(2), 427–434.
11. Godswil, O., Ikpefan, A., Romanus, O., & Emoarehi, E. (2017). Working capital management and profitability of selected deposit money banks in Nigeria. Journal of Association of Professional Bankers in Education (JAPBE), 1(1), 2645–3231.
12. Kolapo, T. F., & Fapetu, D. (2015). The influence of interest rate risk on the performance of deposit money banks in Nigeria. International Journal of Economics, Commerce and Management, 3(5), 1218–1227.
13. Lafrance, R., & Schembri, L. (2002). Purchasing power parity: Definition, measurement and interpretation. Retrieved from https://www.researchgate.net/publication/4905872
14. Malik, M. F., Khan, S., Khan, M. I., & Khan, F. (2014). Interest rate and its effect on bank profitability. Journal of Applied Environmental and Biological Sciences, 4(8S), 225–229.
15. Muriithi, J. G., Muturi, W. M., & Waweru, K. M. (2016). The effect of market risk on the financial performance of deposit money banks in Kenya. Journal of Finance and Accounting, 4(4), 225–233.
16. Murty, V. N., & Chowdaiy, E. R. (2018). Effectiveness of interest rate changes on the profitability of the banking industry in India: An empirical analysis of nationalized banks. IOSR Journal of Business and Management, 20(2-VI), 82–91.
17. Ofosu-Hene, E. D., & Amoh, P. (2016). Risk management and performance of listed banks in Ghana. European Journal of Business Science and Technology, 2(2), 107–121.
18. Oladele, S. A., Amos, M. O., & Adedeji, A. A. (2017). Effects of interest rate on the profitability of deposit money banks in Nigeria. European Journal of Business and Management, 9(10), 46–55.
19. Olusanmi, O., Uwuigbe, U., & Uwuigbe, O. R. (2015). The effect of risk management on the financial performance of banks in Nigeria. Journal of Accounting and Auditing: Research & Practice. Retrieved from http://www.ibimapublishing.com/journals/JAARP/jaar.html
20. Olweny, T., & Shipho, T. M. (2011). Effects of banking sectoral factors on the profitability of deposit money banks in Kenya. Economics and Finance Review, 7(5), 1–3.
21. Osuka, B. O., & Duruechi, A. H. (2018). Determinants of exchange rate fluctuations in a developing economy: The Nigerian experience. The Journal of Banking and Finance, 13(2), 2–26.
22. Osundina, C. K., Osundina, J. O., Jayeoba, O. O., & Olayinka, I. M. (2016). Exchange rate volatility and bank performance: Evidence from Nigeria. HARD International Journal of Economics and Business Management, 2(4), 1–11.
23. Saunders, A., & Cornett, M. M. (2006). Financial institutions management: A risk management approach. New York: McGraw-Hill.
24. Soyemi, K. S., Ogunleye, J. O., & Ashogbon, F. O. (2014). Risk management practices and financial performance: Evidence from Nigerian deposit money banks. The Business and Management Review, 4(4), 345–354.
25. Sufian, F., & Chong, R. R. (2008). Determinants of bank profitability in a developing economy: Empirical evidence from the Philippines. Asian Academy of Management Journal of Accounting and Finance, 4(2), 91–112.
26. Udom, I. S., & Eze, O. R. (2018). Effect of capital adequacy requirements on the profitability of deposit money banks in Nigeria. International Research Journal of Finance and Economics, 165, 81–89.