Accounting Implications of Risk Management Practices on Financial Stability of Commercial Banks in Nigeria

Abstract

This study examined the accounting implications of risk management practices on the financial stability of listed deposit money banks in Nigeria. Specifically, the study investigated the relationship between risk disclosure index, operational risk, market risk, and financial stability indicators such as profitability, liquidity, and solvency positions. It also assessed the moderating effect of accounting implications on the relationship between risk management and financial stability. The study adopted an ex-post facto research design using secondary data obtained from the annual reports of thirteen listed deposit money banks in Nigeria, the Central Bank of Nigeria Statistical Bulletin, and the Nigeria Exchange Group covering the period 1999–2024. Data were analyzed using descriptive statistics, Phillips-Perron unit root test, regression analysis, and Granger causality test. Findings revealed that loan quality and supervisory mechanisms significantly influenced profitability and financial stability, while operational risk showed no significant effect on profitability, liquidity, and solvency positions. The study further found that accounting implications significantly moderated the relationship between risk management and financial stability. The study concluded that effective risk management practices and sound accounting disclosures are critical to improving the financial stability of deposit money banks in Nigeria. It therefore recommended stronger risk disclosure practices, improved internal controls, and enhanced regulatory compliance to strengthen the resilience of Nigerian banks.