Bank Run Prediction and Operational Efficiency of Listed Deposit Money Bank in Nigeria

Abstract

This study examined the relationship between bank-run prediction indicators and the operational efficiency of listed Deposit Money Banks (DMBs) in Nigeria from 2015 to 2024. Using an ex post facto research design, the study employed panel data obtained from the annual financial reports of 15 listed DMBs, including Access Bank, Zenith Bank, GTCO, First Bank, and UBA. Panel data estimation techniques were implemented using E-Views 9.0, applying both fixed and random effects models. The Hausman test confirmed the random effects model as most appropriate. Diagnostic tests such as the panel unit root, Pedroni cointegration, and cross sectional dependence tests validated the robustness of the results. The findings reveal that Liquidity Coverage Ratio (LCR) has a negative and statistically significant effect on Return on Assets (ROA), indicating that excessive liquidity reduces profitability. The Loan-to-Deposit Ratio (LDR) positively affects ROA, showing that efficient credit intermediation improves performance. Capital Adequacy Ratio (CAR) also positively and significantly influences ROA, emphasizing the role of strong capitalization in sustaining profitability. Conversely, Non-Performing Loans Ratio (NPLR) negatively affects ROA, demonstrating that poor asset quality erodes profitability. The study concludes that maintaining an optimal balance between liquidity, lending efficiency, capital strength, and asset quality is crucial for bank stability and profitability. It recommends enhanced liquidity optimization strategies, prudent credit management, and sustained capital strengthening measures. The study contributes to knowledge by integrating prudential ratios as predictors of both bank-run vulnerability and operational efficiency within a unified empirical framework.