Influence of Cost Efficiency on Performance of Nigerian Listed Deposit Money Banks

Abstract

Cost efficiency is very important in this new age since profitability continue to shrink and new business is becoming almost impossible. Therefore, this study is to examine impact of cost efficiency on financial performance of Nigeria deposit money banks. The specific objectives of the study were to; (i) test the effects of efficiency in Fueling and maintenance costs on the performance of Nigerian deposit money banks; (ii) to examine the impact of efficiency in General Administrative expenses on the Performance of Nigerian deposit money banks. Secondary data were collected from annual financial statements of the selected banks. Fixed-effect and random-effect regression analysis method were used to analyze the data from a sample of 13 listed Nigerian deposit money banks covering period of 2010 to 2019. The results showed that cost efficiency have significant impact on financial performance of Nigerian deposit money banks. Implying that bank managements tend to increase profitability by increasing power-running cost efficiency, and by reducing general administrative cost efficiency. The study recommends that; Bank management need to tap into alternative source of energy and holistic approach to monitor wastages and theft of fuel to reduce power running cost for performance increasement. The board of directors should ensure that good business administration is their focus, by employing efficient control on administrative expenses to improve bank performance.