A Comparative Analysis of Pre and Post Re-capitalisation Financial Performance of Banks in Nigeria

Abstract

This study is a comparative analysis of pre and post recapitalisation financial performance of banks in Nigeria. The study employs secondary data from eight banks over a six-year of 2002 to 2008 broken into pre and post recapitalisation periods. The hypotheses of the study were tested using Wilcoxon signed rank test under 5% significance level. The study finds that the re-capitalisation has no significant effect on pre-tax profit margin, return on total assets, earning per share and dividend per share but has a significant effect on net interest income on loans and advances and return on equity. The study recommends that: the banks should carry out effective financial intermediation so as to enhance their profit generating ability; management demonstrate expertise by converting banks’ assets to cash. It
further recommends that the performance of the net interest income on loan and advances and return on equity should be sustained; the use of cheaper loan funds to generate higher profit should be encouraged. Management should show commitment to shareholders by the dividends they pay to justify their investments. Regulatory authorities should re-appraise the use of recapitalisation through mergers and acquisitions as a means of injecting efficiency gains into the sector since it is not all time that recapitalisation through mergers and acquisitions translates to good financial performance in the sector