Performance Management Process


1.1 Background to the StudyAn organisation performance consists of financial and non-financial performances that project the company to its immediate environment and the world in general (Weldeghiorgis, 2004). According to Weldeghiorgis (2004) the financial performance implementation and running of the organisation is a part of the total performance management approach that an organisation or a firm will make use of; to gain more financial and economic performance. The evaluation of fiscal progress and financial value progress are more significant means of supporting and helping a company, and it is one of the ways of evaluating any organisation (Zairi, 1996 Weldeghiorgis, 2004). Al-Enizi et al. (2006) estimated that the classification of the limits of financial performance and conventional fiscal moves forward through estimations that facilitated to numerous research programs which promoted the making use of non-fiscal progress estimation. Al-Enizi et al. (2006) studied critically consumer consent, transport, and other significant accomplishment aspects as a pattern of non-financial performance measurements (NFPMs). While, Le Roux (2004) revealed that efficient administration of firms provides a sound base that marks procedure which aid estimation of development of firms, activities such as transaction, client facilitation, expenditure, and supervision of workers, which may facilitate an organisation to accomplish financial performance progress. There are many actions that need to be useful and which must make possible the accomplishment of financial performance such as redistribution of a turnover (assuming that the company is doing well) by means of a Planning system flow chart and refers to performance measurement points as review of gap analyses (Schutte, 1993). The deposit money banks, insurance companies and mortgage investment activities are the foundation of Nigerias financial system. The firm day to day activities is shouldered by different types of trade venture. Having it at the back of our mind, individual ownership, ownership through a share of the companies are the main types of business. Financial performance displays the reflection of the sustaining progress of firms (Lin and Piesse, 2004). Financial sector finds out to make better financial performance and establish value in terms of creating more wealth for their shareholders and enhance satisfaction to their numerous customers and other stakeholders (Lin and Piesse, 2004). To make this objective come to fruition, they make use of different types of performance management systems. As time goes on, we have seen an excess of new management techniques for improving organisational performance (Lin and Piesse, 2004).  Koller (1994) nevertheless examines that while many of these performance management systems have been accomplished, many have also been struggling to succeed. He opines further that the cause of failure was usually performance targets that were not clear of properly tailored well with the ultimate goal of creating value In their own view. Echebarria-Miguel and Barrutia-Legarreta (1999) illustrate the unproductive performance management systems as fractional techniques to business realities. This is the reason; it is no longer resourceful in a globe where the organisational surrounding has become progressively more complicated. Consequently, for us to move towards business realities with sophisticated and realistic calculation a new management concept has been developed; that is value creation  a renewed method to business management which pursues the creation of shareholders value through the delivery of value to numerous customers and business associates (Echebarria-Miguel and Barrutia-Legarreta, 1999; Lin and Piesse, 2004).For the value to be created, the management of the organisation needs to comprehend how to identify, select and segment the market in which to contend; defined the kind of value to be proposed on the market; and create a supply for such value (Echebarria-Miguel and Barrutia-Legarreta, 1999). The cause behind this is that the firm that is trying to create value must also generate returns in excess of the cost of capital over a long period of time (Favaro, 1998). Alternatively, the particular firm must earn a positive economic profit so that when expenses and capital charge are minus from the revenue generated, the balance will be higher or greater than zero (> 0). In a swift, value creation takes place when the firm generates more or additional wealth for their shareholders that they could not have been able to generate for themselves (Van Horne, 2002). The civilian administration established in an office 1999 took over or inherited a delicate and weakness banking system, which was characterised by low capitalisation and inability to effectively support the real sector and arouse economic growth. With this situation, the banking sector became uncertain, with many having experienced financial distress and bank failure as a result of non-performance loans. After the consolidation evaluation, the Nigeria banking industry has also showed that as from October 2008, some of the banks that have been consolidated, had begun to show serious signals of liquidity strain and had to be given some level of financial backing in form of Expanded Discount Window (EDW) by the Central Bank of Nigeria (CBN). This pointed out that the consolidation terrain of 2005, may not have led to the expected outcome as most problems, which surfaced in the banking industry before the consolidation exercise, are still there. From the above-mentioned crises that have been established, it could only mean that Nigerian banks have been functioning under the expectation of stakeholders (shareholders, customers, employees, etc.).In view of the fact that the introduction of Structural Adjustment Programs (SAP) was in the late 1980s, the banking sector throughout the world has experienced major transformations in its operating environment. Countries have effortlessness controls on interest rates, reduced government participation and opened their doors to international banks (Ismi, 2004). Due to this reform, firms of the developed nations have become more visible in developing countries through their subsidiaries and branches or by gaining of foreign firms. More specifically, foreign banks presence in other countries across the world has been increasing tremendously. Since the 1980s, many foreign banks have built up their branches or subsidiaries in different parts of the world. In the last two decades or so, the amount of foreign banks in Africa as a whole and Sub-Saharan Africa, in particular, has been increasing significantly. On the contrary, the number of domestic banks declined (Claessens and Hore, 2012.) These have enticed the interests of researchers to examine bank performance in connection to these reforms. There have been significant changes in the financial configuration of countries in general and its effect on the profitability of commercial banks in particular. It is crystal clear, that a sound and profitable banking sector is able to endure negative shocks and contribute to the stability of the financial system (Athanasoglou et al. 2005.) Moreover, commercial banks play a vital role in the economic growth of countries. Through their intermediation function, banks play a vital role in the efficient allocation of resources of countries by mobilising resources for productive activities. They transfer funds from those who don\’t have productive use of it to those with the productive venture. In addition to resource allocation, better bank performance rewards the shareholders with sufficient return for their investment. When there is return there shall be an investment which, in turn, brings about economic growth. On the other hand, poor banking performance has a repercussion on the economic growth and development. Poor performance can lead to runs, failures, and crises. Banking crisis could entail financial crisis which in turn brings the economic meltdown as happened in the USA in 2007 (Marshall, 2009.) That is why governments control the banking sector through their central banks to foster a sound and healthy banking system which avoid banking crisis and protect the depositors and the economy (Heffernan, 1996; Shekhar and Shekhar, 2007.) Thus, to avert the crisis, due attention was given to banking performance. 1.2 Statement of the Research ProblemThe current research is different from earlier research studies in term of sample procedure of analysis. Earlier researchers have used return on asset (ROA) and return on equity (ROE) as a method for calculating financial performance. In this research, Economic Performance was used for the calculation of financial performance. The financial performance has gotten more attention and importance from the academic environment of different disciplines. It was a known fact that financial performance got the attention of great experts of trade activities because financial progress has impacts on the quality of firms and their sustainability. Also, the performance of the banks is critical for any countrys economic development because of the essential roles of banks in the economy. Considering the empirical analysis of the performance of banks; it is an important requirement for further policy changes. As pointed out in the Central Bank of Nigeria Banking Sector Report (2012), the health of the financial system depends to a larger extent on the soundness of financial institutions, particularly the deposit money banks. Secondly, some banks are still facing a crisis that threatens their survival despite the continuous reform process. Indeed, before the advent of the global financial crisis of 2008, most of these deposit money banks have the share price over-valued (Nwude, 2012; and Mustapha, 2017); shortly after the crisis was over, 2011 to be precise, the issue of sustaining the financial performance and market value became major concerns to the listed deposit money banks (Mustapha, 2013; and 2017). The major reasons outlined in the literature for this sustainability issue was the inability of this deposit money banks to identify the determinants of the financial performance of the sector, and the most appropriate manner to assess the financial performance of these deposit money banks. If the firms financial performance was appropriately assessed before the crisis then, the issue of over-valuation of market value will be curtailed after the crisis. Hence, the sustainability issue will be minimized. Meanwhile, the studies on organisational performance of other sectors in Nigeria are broad but there are few works on banking sector performance especially on the specific factors that determine the financial performance of deposit money banks in Nigeria. Therefore, this study intends to investigate the financial performance through the financial performance of listed financial sectors firms in Nigeria.Numerous studies have been carried out which centred on the determinants of profitability and performance of the banking industry in Greece (Varelas, Karpetis and Konokarpeti, 2004; and Athanasoglou, Brissimis and Delis 2005), the United States of America (Berger, Hanweck and Humphrey, 1987; Angbazo, 1997; and Gilson, 1998), European Union (Goddard, Molyneux and Wilson, 2004), Tunisia (Naceur and Goaied, 2001 and Naceur, 2003) and Colombia (Barajas, Steiner and Salazar, 1999), and Malaysia (Katib, 2000). Not any of these research works have, however, look at or examines the concept or issue of creation of shareholders value. The studies of Naceur (2003), Boston Consulting Group (2003, 2005, 2007, and 2008) centre on the creation of shareholders value, and Nigeria was not considered in their work. There are also researches related to the Nigerian banking industry (e.g. Nwosu and Nwosu, 1998; Uche and Ehikwe, 2001; Beck, Demirgüç-Kunt and Levine, 2004; Brownbridge, 2005; Jat, 2006; Aburime, 2008a; Aburime, 2008b; Aburime 2008c) have connected the features of individual banks, industry-level factors and macroeconomic factors to profitability of the Nigerian banks, none of these specific links profitability, dividend policy, financial policy, industry-level factors and macroeconomic factors to the creation of shareholders value in the Nigerian banking industry. The existence of this gap in this research work is the primary reason for this study. This study consequently aims at studying the determinants of the financial performance of listed deposit money banks in Nigeria.1.3 Research QuestionsThe following research questions emanated from the concerns raised in the statement of the problem:i.What is the relationship between leverage and financial performance of listed deposit money banks in the Nigerian Stock Exchange?ii.What is the relationship between liquidity and financial performance of listed deposit money banks in the Nigerian Stock Exchange?iii.What is the relationship between size and financial performance of listed deposit money banks in the Nigerian Stock Exchange?

1.4 Research ObjectivesAgainst the background, the study broad objective is to examine the determinants of financial performance in the deposit money banks listed on the Nigerian Stock Exchange. Specifically, the study intends to:  i.examine the relationship between leverage and financial performance of listed deposit money banks in the Nigerian Stock Exchange;ii.investigate the relationship between liquidity and financial performance of listed deposit money banks on the Nigerian Stock Exchange;iii.examine the relationship between size and financial performance of listed deposit money banks on the Nigerian Stock Exchange.

1.5 Research HypothesesThe following null hypothesis was designed for the research: H0: Leverage has no significant relationship with Financial Performance of listed deposit money banks on the Nigerian Stock Exchange.H0: Liquidity has no significant relationship with Financial Performance of listed deposit money banks on the Nigerian Stock Exchange.H0: Size has no significant relationship with Financial Performance of listed deposit money banks on the Nigerian Stock Exchange.1.6 Justification of the StudyThe research study has emphasised that the capacity of financial performance is significant for numerous grounds. First, financial performance is an important part of financial organisation planning to take out their business fruitfully in the aggressive atmosphere of the financial marketplace. Second, in the speedily altering and more globalised financial marketplace, governments, regulators, managers, and investors are worried about how professionally economic sectors convert their valuable inputs into different financial products and services. Third, the financial performance procedures are serious feature of the economic sector that permit us to differentiate financial sectors which has the ability to carry on and prosper against those that may have problems with competitiveness.Accordingly, a study in this area is important for the following reasons. First, improvements in the performance of deposit money banks are vital for providing a more efficient system of asset allocation in the financial services sector. Since Nigeria has a bank-led financial services sector, the financial performance of the banking industry is important for providing financial infrastructure for economic development. Based on this relevance, the significance of this study comes from information that financial organisation plays an important role in enhancing the national economy and providing significant services for peoples of Nigeria. This research has practically put into operation complete systematic structure of financial performance in case of financial organisation of Nigeria. The research study has observed the impact of key elements of an organisations financial performance. This research study has examined the elements which provide a base for other future research studies in this area of research. This study has differentiated among financial and non-financial elements and financial performance of financial organisations in Nigeria. The current research study has recognized the result of leverage, liquidity, size, risk, tangibility, and other non-identified variables of financial sectors of Nigeria.1.7 Structure of the thesisThe study report is organised as follows: chapter one introduces the topic, state the research problem, research questions, research hypotheses and the justification of the study, while Chapter two discusses the determinants of financial performance and its contributions to financial sector and also to measure the profitability of deposit money banks, which entails the variety of ratios used according to Murthy and Sree,(2003) Alexandru et al. (2008), they are; Return on Equity, Return on Asset and Net Interest Margin. Chapter three presents the methodology and the research design and the sample used. Chapter four presents the results of the empirical research and interpretation; while chapter five, concludes the study with a summary and recommendations for further research.


2.0 PreambleThis chapter consists of conceptual revenue, empirical review and theoretical review on the subject matter.

2.1 Conceptual Review

2.1.1Bank Performance IndicatorsProfit, as we have known, is a definitive objective of commercial banks. Every approaches planned and designed and also performed thereof are intended to realize this grand objective. In any case, this does not imply that commercial banks have no different objectives other than that. Commercial banks could likewise have added social and economic goals. Be that as it may, the goal of this thesis is identified with the first objective, profitability. To estimate the profitability of commercial banks there are various of ratios utilised of which Return on Asset, Return on Equity and Net Interest Margin are the significant ones (Murthy and Sree, 2003; Alexandru et al., 2008). Return on Equity (ROE) The Return on Equity (ROE) is a financial ratio that alludes to how much profit an organisation earned contrasted with the aggregate sum of investor value contributed or found on the balance sheet. ROE is the thing that the investors search as an end-result of their investment. For a business that has an exceptional yield on equity is bound to be one that is equipped for generating cash internally. Therefore, the higher the ROE the better the organisation is in terms of profit generation. It is additionally clarified by Khrawish (2011) that ROE is the ratio of Net Income after Taxes divided by Total Equity Capital. It represents the rate of profit earned on the funds invested in the bank by its stockholders. ROE is an indicator of how successfully a bank and her board or management is utilising investors\’ funds. Accordingly, it may be reasoned from the above articulation that the better the ROE the more successful and effective the administration is using the investors capital. Return on Asset (ROA) Return on Asset (ROA) likewise is another major ratio that shows the profitability of a bank. It is a proportion of Income to its total asset (Khrawish, 2011). It quantifies the capacity of the bank management to generate income by utilising company assets at their disposal. Alternatively, it indicates how effectively the assets of the organisation are utilised to generate income. It further demonstrates the productivity of the administration of an organisation in generating net income from all the resources of the institution (Khrawish, 2011). Wen (2010), expresses that a higher ROA demonstrates that the organisation is increasingly proficient in utilising its assets. Net Interest Margin (NIM) Net Interest Margin (NIM) is the calculation of the disparity between the interest income created by banks and the amount of interest paid out to their lenders (for instance, deposits), relative to the number of their (interest-earning) assets. It is normally communicated as a percentage of what the financial institution makes on loans in a certain time period and other assets minus the interest paid on borrowed funds divided by the average amount of the assets on which it earned income in that period of time (this is the average earning assets). The NIM variable is characterised as the net interest income divided by total earnings assets (Gul et al., 2011). Net interest margin estimates the aperture or gap between the interest income the bank gets on advances and securities and interest cost of its borrowed funds. It mirrors the expense of bank intermediation administrations services and the efficiency of the bank. The stability of the bank is depending on the higher level of net interest margin and banks profitability level. Consequently, it is one of the key determinants of bank profitability. Be that as it may, a higher net interest margin could reflect riskier lending practices associated with substantial loan loss provisions (Khrawish, 2011).

2.1.2 Determinants of Bank Performance The determinants of bank performance can be characterised into bank-specific (internal) and macroeconomic (external) factors (Al-Tamimi, 2010; Aburime, 2005). These are stochastic variables that decide the yield or output. Internal components are individual bank qualities which influence the bank\’s performance. These components or factors are fundamentally impacted by internal decisions of management and the board. The external factors are country-wide factors or sector-wide that is outside the control of the organisation and influence the profitability of banks. By and large financial performance of banks in Nigeria in the last twenty years has been improving. Nonetheless, this doesn\’t imply that all banks are making a profit, there are banks announcing losses too (Oloo, 2010). Studies have demonstrated that bank-specific and macroeconomic factors affect the performance of commercial banks (Flamini et al. 2009). In such a manner, the investigation of Olweny and Shipho (2011) in Nigeria concentrated on sector-specific factors that affect the performance of commercial banks. However, the impact of macroeconomic factors was excluded. Bank Specific Factors/Internal Factors As clarified above, the internal factors are bank-specific variables which control the profitability of the specific bank. These components are inside the extent of the bank to control them and that they vary from bank to bank. These integrate capital size, the structure of credit portfolio and size, size of deposit liabilities, labour productivity, interest rate policy, and state of information technology, management quality, risk level, bank size, ownership and so forth. CAMEL framework is regularly utilised by researchers to proxy the bank-specific factors (Dang, 2011). CAMEL represents Capital Adequacy, Asset Quality, Management Efficiency, Earning Ability, and Liquidity. Each one of this indicator is further talked about below. Capital Adequacy Capital is one of the bank-specific components that have to impact the degree of bank profitability. Capital is the amount of own fund accessible to help the bank\’s business and go about as support if there should be an occurrence of unfavourable circumstance (Athanasoglou et al. 2005). Banks capital makes liquidity for the bank because of the way that deposits are most fragile and prone to bank runs. In addition, greater bank capital reduces the chance of distress (Diamond, 2000). Be that as it may, it is not without drawbacks that it induces weak demand for liability, the cheapest sources of fund Capital adequacy is the level of capital required by the banks to enable them to withstand the dangers such as credit, market and operational risks they are exposed to in order to take in the potential loses and protect the bank\’s debtors. As indicated by Dang (2011), the ampleness of capital is made a decision based on the capital adequacy ratio (CAR). Capital adequacy ratio demonstrates the inner quality or strength of the bank to withstand losses during the crisis. Capital adequacy ratio is straightforwardly corresponding to the resilience of the bank to crisis situations. It has likewise an immediate and direct impact on the profitability of banks by deciding its extension to hazardous, however profitable ventures or areas (Sangmi and Nazir, 2010). Asset Quality The bank\’s asset is another bank-specific variable that influences the profitability of a bank. The bank asset incorporates among other current assets, credit portfolio, fixed asset, and different investment. Regularly a growing asset (size) identified with the age of the bank (Athanasoglou et al., 2005). Usually, the loan of a bank is a significant asset that produces the real portion of the bank\’s income. The loan is the significant asset of commercial banks from which they generate income. The nature of credit portfolio determines the profitability of banks. The loan portfolio quality has an immediate bearing on bank profitability. The most astounding danger confronting a bank is the losses derived from delinquent loans (Dang, 2011). Hence, non-performing loans ratios are the best proxies for asset quality. Various types of financial ratios used to study the performances of banks by different researchers. It is the significant worry of every commercial bank to keep the amount of non-performing loans to a low level. This is so in light of the fact that a high non-performing loan influences the profitability of the bank. Along these lines, low non-performing loans to total loans demonstrate that the good health of the portfolio of a bank. The lower the ratio the better the bank performance (Sangmi and Nazir, 2010). Management Efficiency Management Efficiency is one of the key internal components that decide bank profitability. It is represented by various financial ratios like total asset growth, loan growth rate, and earnings growth rate. However, it is one of the complexes subject matter to capture with financial ratios. Also, operational proficiency in dealing with the operating expenses is another measurement for management quality. The performance of management is frequently communicated qualitatively through subjective assessment of management frameworks, organisational discipline, control systems, quality of staff, and others. However, some financial ratios of the financial statements act as a proxy for management efficiency. The capacity of the board to deploy its assets effectively, income maximisation, reducing operating costs can be measured by financial ratios. According to Rahman et al in Ilhomovich 2009; Sangmi and Nazir, 2010), one of these ratios used to measure management excellence is operating profit to income ratio. The higher the operating profits to total income (revenue) the more the productive administration is regarding operational proficiency and income generation. The other significant ratio is that proxy management quality is an expense to asset ratio. The ratio of working costs/operating expenses to add up to asset is expected to be negatively associated with profitability. Management quality in such a manner determines the degree of working costs/operating expenses and thusly influences profitability (Athanasoglou et al. 2005). Liquidity Management Liquidity is another factor that determines the degree of bank performance. Liquidity refers to the capacity of the bank to satisfy its commitments, for the most part of her depositors. According to Dang (2011), a sufficient degree of liquidity is positively related to bank profitability. The most widely recognized financial ratios that mirror the liquidity position of a bank as per the above author are customer deposit to add up to asset and total loan to customer deposits. Different researchers utilize distinctive different financial ratio to measure liquidity. For example, Ilhomovich (2009) utilised the cash to deposit ratio to measure the liquidity level of banks in Malaysia. In any case, the thesis conducted in China and Malaysia found that liquidity level of banks has no association with the performance of banks (Said and Tumin, 2011). External Factors/Macroeconomic Factors The macroeconomic policy stability, Gross Domestic Product, Inflation, Interest Rate, and Political instability or unsteadiness are additionally other macroeconomic factors that influence the performance of banks. For example, the pattern of GDP influences the interest of banks asset. During the declining GDP growth, the interest and demand for credit or loans fall which thus adversely influence the profitability of banks. In actuality, in a growing economy, as expressed by positive GDP growth, the demand for credit is high due to the nature of the business cycle. During the boom, the interest for credit is high compared to recession (Athanasoglou et al., 2005). Similar authors state in connection to the Greek situation that the connection between inflation level and banks profitability remains debatable as the direction of the relationship is not clear (Vong and Chan, 2009). Ownership Identity and Financial PerformanceThe real study of the connection between ownership and performance is one of the main issues in corporate governance which has been the subject of continuous discussion in the corporate finance literature. The connection between firm performance and ownership identity, assuming any, exude from Agency Theory. This theory deals with owners and managers relationship, which one way or the different refer to ownership and performance. In connection with the performance as indicated by Javid and Iqbal (2008), the identity of ownership matters more than the concentration of ownership. This is so in light of the fact that ownership identity shows the behaviour and interests of the owners. Ongore (2011) argues that the risk-taking behaviour and investment orientation of shareholders have a great influence on the decisions of managers in the day-to-day affairs of firms. As indicated by Ongore (2011), the idea of ownership can be described along two lines of thought: ownership mix and concentration. The focus points to the proportion of shares held (largest shareholding) in the firm by few shareholders and the later defines the identity of the shareholders. Morck et al. in Wen (2010) clarified that ownership concentration has two possible penalties. The predominant investors have the power and motivator to intently screen or monitor the performances of the management. This alternatively has two further results in connection to firm performance. From one perspective close checking or monitoring of the management can decrease agency cost and improve firm performance. On the other hand concentrated ownership can generate a problem in connection to overlooking the right of the minority and also affect the innovativeness of the management (Ongore, 2011; Wen, 2010). Concerning the connection between ownership identity & bank performance, various researchers came up with varying outcomes. For instance, according to Claessens et al., (1998) domestic banks\’ performance is better compared to their foreign counterparts in developed countries. According to the same researchers, the opposite is true in developing countries. As indicated by similar researchers the inverse is valid in creating nations. Micco et al. in Wen (2010) also buttress the above argument in which the performances of foreign banks developing countries is better compared with the other types of ownership in developing countries.  In any case, Detragiache (2006) displayed an alternate view about foreign bank\’s performance in connection to financial sector development, financial deepening, and credit creation in developing countries. He noted that the performances of foreign banks compared to their domestic owned banks are substandard in developing countries. Ownership is one of the variables that militating against the performance of banks. In particular, ownership identity is one of the factors explaining the performances of banks across the board; yet the level & direction of its effect remained contentious. There are scholars who believed that foreign firms achieve better with high-profit margins and low costs compared to domestic owned banks (Farazi et al., 2011). This is so in light of the fact that foreign-owned firms claimed firms are accepted to have tested management expertise in other countries over the years. In addition, foreign banks regularly customised and apply their task frameworks found compelling in their home countries (Ongore, 2011).It is additionally accepted that banks crossing boundaries are frequently those huge and successful ones. For example in countries like Thailand, Middle East, and North Africa district, it was discovered that foreign banks performance is superior to domestic partners (Azam and Siddiqui, 2012; Chantapong, 2005; Farazi et al. 2011). The study conducted in Pakistan by Azam and Siddiqui (2012) and in conclusion, it shows that \”…foreign banks are more productive and profitable than every single local or domestic bank regardless of their ownership structure by applying regression analysis.\” They further recommend that \”…it is better for a multinational bank to set up a backup/branch instead of getting a \”current player\” in the host country.\” Furthermore, Chantapong (2005) by studying domestic and foreign banks performance in Thailand rounded it off that foreign banks are better in profit-making than the average domestic bank\’s profitability. It is likewise bolstering by Okuda and Rungsomboon (2004) that foreign-owned banks in Thailand are found to be efficient compared to their domestic counterparts due to modernized business activities supported by technology, reduced costs related with fee-based businesses and improved their operational efficiency. These show that in the area studied above foreign banks were found to be more profitable than their domestic counterparts. The major cause behind these statements is that foreign banks were considered to be strong & resourceful.Be that as it may, there are researchers who contend that domestic banks perform better than foreign banks. For example (Cadet, 2008) expressed that \”… foreign banks are not in every case more productive or efficient than domestic banks in developing countries, and even in a nation with low pay level.\” Yildirim and Philippatos in Chen and Lia (2009) similarly maintain the above view that foreign-owned banks performed worse, even not exactly with the domestic banks in connection to developing countries majorly in Latin America. The study carries out in Turkey by Tufan et al. (2008) in addition found out that domestic banks perform better compare to their foreign counterparts. There are likewise different researchers who contend that the performance of domestic and foreign banks differs from region to region. Claessens et al. (1998).  For instance, it was stated that foreign banks perform better in developing countries compared to when they are in developed countries. Thus, they rounded off their study that domestic banks perform better in developed countries than when they are in developing countries. They further affirm that an increase in the share of foreign banks leads to lower profitability of domestic banks in developing countries. Thus, does ownership identity control the performance of commercial banks? Studies have shown that bank performance can be hampered by internal and external factors (Athanasoglou et al. 2005; Al-Tamimi, 2010; Aburime, 2005.) More so, the immensity of the effect can be affected by the choice of management. The managements choice, thusly, is influenced by the interest of the owners which is controlled by their investment preferences and risk appetite (Ongore, 2011). This suggests the moderating function of ownership identity. This study tried to examine whether ownership identity considerably moderates the relationship between commercial banks\’ financial performance and its determinants in Nigeria or not.2.1.3CAMEL model and Bank performance2.1.3.1Capital adequacy and bank performanceJha and Hui (2012) led an investigation into a research work that analysed and compared the financial performance of dissimilar ownership structured of commercial banks in Nepal based on their financial quality. The study recognised the determinants of performance exposed by financial ratios that were based on the CAMEL model. Jha and Hui analysed eighteen (18) banks for the period of 2005 to 2010. The researcher made use of the econometric model, multivariate regression analysis, by formulating two regression models to exploit in evaluating the impact of capital adequacy ratio, net interest margin ratio, interest expenses to total loan, non-performing loan ratio, and credit to deposit ratio on the financial profitability. The research came out with the outcome and make known that return on assets was significantly influenced by capital adequacy ratio, interest expenses to total loan and net interest margin, while capital adequacy ratio substantial effect on return on equity.Correspondingly, Kosmidou et al., (2008) carried out paperwork on the impact of bank-specific features, macroeconomic conditions and financial market structure of UK owned commercial banks profits. The researchers calculated the effects on profitability using the return on average assets (ROAA) and net interest margins (NIM). The research covered the period 1995-2002 where an unbalanced panel data set of two hundred and twenty-four (224) observations was made available for the econometric analysis. The results of the findings indicated that capital strength as shown by the equity to assets ratio is a significant determinant of the profitability of the UK commercial banks.An examination was done by Athanasoglou et al, (2008) this was to analyse the impact of bank-specific, industry-specific and macroeconomic factors on bank profitability using an empirical framework that incorporated the traditional Structure-Conduct-Performance (SCP) hypothesis. The exploration and research included Greek banks that were conducted between 1985-2001. The researchers adopted various independent variables, namely capital, credit risk, productivity, expense management, ownership, inflation, and business cycles. The empirical results showed that capital is very important in explaining bank profitability. The findings also indicated that capital raised up the exposure to credit risk and lowers profits for commercial banks.Ifeacho C. and Ngalawa H. (2014) did an exploratory study on the effect of bank-specific variables and some particulars and selected macroeconomic variables on the South African banking sector between the years of 1994 to 2011. The researcher regarded the capital adequacy, asset quality, management, earnings ability and liquidity under the CAMEL model of bank performance evaluation in the study. The Ifeacho and Ngalawa s study made use of data in annual frequency from South Africas four largest banks, namely ABSA, First National Bank, Nedbank, and Standard Bank. The four banks account for over 70% of South Africas banking assets. The researcher investigated the banks using the return on assets (ROA) and return on equity (ROE) as measures of the bank performance. Results of the outcome showed that capital adequacy displayed a significant negative association with ROA, while its connection with ROE is significant and positive as expected.Okoth and Gemechu (2013) also conducted research on the feature or factors that establish the financial performance of commercial banks in Nigeria. The paper was carried out during the period of 2001 to 2010. The researchers utilised the linear multiple regression model and Generalized Least Square on panel data. The researchers used independent variables such as capital adequacy, asset quality, Management Efficiency, Liquidity Management, GDP growth rate, and inflation. The dependent variables used to calculate the performance factored in into the return on investments (ROA), return on equity (ROE), and Net Interest Margin NIM. The findings indicated that the considered bank-specific factors had a significant impact on the performance of commercial banks in the country. Asset quality and bank performance Sufian and Chong (2008) studied thoroughly the determinants of financial performance under profitability within the period of 1990-2005 in Philippines banks. The after-effects of the examination demonstrated a direct connection between financial performance and bank-specific factors or components. Likewise, the empirical outcome of the results suggested that the bank-specific factors including asset quality affects profitability and by extension the financial performance of the banks. Loans are a major asset in Nigerias commercial banks that produces or generates a large portion of a banks income. On the other hand, the loans also expose the banks to latent losses derived from delinquent loans (Dang, 2011). It is worthwhile and advisable for banks to keep their amount of non-performing loans to low levels by commercial banks because such loans affect the profitability of the banks and eventual financial performance (Sangmi and Nazir, 2010). Vong et al, (2009) accomplished a research paper whose main goal was to assess the contribution and commitment of bank-specific, macroeconomic, and financial structure factors to the profitability of banks in Macao. The scholars utilised bank-level data for the period of 1993-2007. Furthermore, the researcher makes use of panel data regression to ascertain the important factors in achieving high profitability by using internal variables, namely capital ratio, asset composition, asset quality, expense management, source of funds, and market share. The paper also included external variables, such as the GDP growth rate, real interest rate, and inflation. ROA was the main ratio used as a determining factor of profitability for the commercial banks. The results of the research indicated that the capital strength of a bank has a positive impact on profitability. On the contrary, asset quality measured by the loan-loss provisions negatively affects the performance of the commercial banks.Research work was conducted between 1994 and 2011 by Ifeacho C. and Ngalawa H. on the impact of bank-specific variables and selected macroeconomic variables on the South African banking sector detect that asset quality has a positive and encouraging effect on bank performance. The study employed the CAMEL model in estimation of bank performance and carried out an investigation on the bank\’s performance using the return on assets (ROA) and return on equity (ROE) as measures of the bank performance. As indicated by the discoveries of the findings, all bank-specific variables are statistically noteworthy determinants of bank performance.In Nigeria, Olweny and Shipho (2011), conducted research work in Nigerias banking industry to examine the effects on bank-specific factors on the financial performance of commercial banks. The study made use of an explanatory method by employing panel data research design. Annual financial statements of thirty-eight (38) Nigerian banks from 2002 to 2008 were gotten from the Central Bank of Nigeria and banking survey 2009 for the analysis purpose. The researchers estimated the data employing a multiple linear regression method. The study showed that commercial banks can perform better through achieving profitability by improving asset quality this is by reducing the rate of non-performing loans. Management efficiency and bank performanceThe capability of the management of commercial banks to organise its resources efficiently, income maximisation, reducing operating costs can be established using financial ratios. The nature and quality of management exhibited by the finance departments of commercial banks measured the levels of operating expenses and as a result affects profitability and financial performance (Athanasoglou et al., 2008). A research work carried out by Liu (2011) concentrated on the effects of variables from the CAMEL model on bank performance in China. The study focused on the CAMEL variables that included capital adequacy, asset quality, management, earnings ability, and liquidity. The researchers sample size consisted of thirteen (13) Chinese banks all listed in the Shanghai Stock Exchange between 2008 and 2011. Liu employed the fixed effects multiple linear regression model in his research to determine the association between internal factors from CAMEL model and bank performance. The results of this research work indicated that return on assets is directly affected by shareholders risk-weighted capital adequacy ratio, costs to income ratio, net interest rate margins, and loans to deposits ratio. Moreover, the results pointed out that the return on equity could be hindered or affected by costs to income ratio, operating expenses to assets ratio and loans to deposits ratio. Management efficiency was therefore seen to be a major factor to the result of these indicators and consequently a major determinant of bank performance.Sufian and Chong (2008) studied critically the determinants of financial performance under profitability between the periods of 1990-2005 in Philippines banks. The outcomes of the research work showed a positive relationship between financial performance and bank-specific factors. Correspondingly, the empirical findings of the results suggested that the bank-specific factors such as capital adequacy, asset quality, and management efficiency affects profitability and by extension the financial performance of the banks. As indicated by Sufian and Chong inadequate or poor expenses management is the main contributor to poor performance. Operational expense efficiency is one way of evaluating managerial effectiveness in banks. From the results of the conducted research work by Olweny and Shipho (2011) in Nigeria, it can be distinguished that banks that improve their capital base, reduce operational costs and make use of revenue diversification strategies are likely to be more profitable. The specific items highlighted in the research work are an expression of management. Earnings ability and bank performanceEarnings ability symbolises the potential for a bank to realise profits that make possible the organisation to support expansion remain competitive and increase its capital. From the banks regulatory viewpoint, earnings abilitys essential purpose is to take up losses and boost the banks capital. Earning ability can be estimated using a series of accounting ratios namely return on assets (ROA), return on equity (ROE), and net interest income margin (NIM), (Ongore & Kusa, 2013). Aziza and Sarkani (2014) looked into the financial performance of Mellat bank employing the CAMEL model. Mellat bank is a private bank in Iran that has existed since 1980 as a merger of ten pre-revolution private banks. Each of the CAMEL model dimensions was critically examined by means of a trend analysis technique and both mean and standard deviation statistics. In the process, the researchers determined all the model criteria and identified an ascending trend in the period under investigation. The researchers, in addition, examined the connection between the model variables and the financial performance of Mellat bank and studied well the relationship using two linear and multiple regression as well as OLS method. The results of the research work demonstrate that there exist positive significant relationships between the indices of earnings ability with financial performance. Okoth and Gemechu (2013) carried out research on the factor that determines the financial performance of commercial banks in Nigeria. The research work took place during the period 2001 to 2010. The researchers employed the linear multiple regression model and Generalized Least Square on panel data. The researchers make use of independent variables such as capital adequacy, asset quality, management efficiency, earnings ability, liquidity management, GDP growth rate, and inflation. The dependent variables used to calculate the performance included the return on investments (ROA), return on equity (ROE), and Net Interest Margin NIM. The outcomes signified that the considered bank-specific factors had a significant impact on the performance of commercial banks in the country. Furthermore, the research work showed a significant effect of earnings ability on bank performance. Liquidity and bank performance Weerasinghe and Ravinda (2013) led a research paper to investigate the impacts of bank-specific factors, for example, liquidity risk, bank size, capital adequacy, operating cost, credit risk and macroeconomic determinants for instance GDP growth rate and the interest rate on the profitability of commercial banks in Sri Lanka. The analysts used quarterly data identifying and relating with the bank-specific and macroeconomic indicators. The research work was established between 2001 and 2011. We make use of multiple panel regression to analyse the data and establish the relationship between the dependent and the independent variables. In addition, the researchers employed the ROA and the ROE as profitability determinants of the banks under the study. The empirical results indicated that the larger the commercial banks the more the profits recorded. This is why the economies of scale as compared to the banks with a higher regulatory capital ratio. Additional research work shows that from the panel regression indicated that the liquidity was negatively or inversely proportional to the commercial bank\’s profitability in the country.Abera, A. (2012) also researched on a study on the factors affecting profitability in the Ethiopian banking industry. The empirical research work focused on investigating bank-specific, industry-specific and macro-economic factors that had a direct impact on the profitability of commercial banks in Ethiopia. The paper covered the periods of 2000-2011 using mixed techniques research approach. The method combined documentary analysis and in-depth interviews to collect substantial data for the study. The target population for Aberas research included commercial banks registered by NBE where eight (8) banks were sampled and investigated. Even though the regression analysis pointed out that liquidity had a negligible effect on the profitability of the commercial banks, the in-depth interviews showed that liquidity in banks was a major factor that had an important effect on the profitability of Ethiopian commercial banks. Nevertheless, the regression analysis and the interviews indicated that there existed a negative trend relationship between liquidity and profitability.Hadad (2013) in Ghana conducted a research work, whose main objective was to establish the factors that affected the financial performance of the Naara rural banks in the upper east region of the country. The researcher employed the annual financial statements that covered an 11year-long period between 2000 and 2010. Multiple regression analysis was put to use as the main statistical tool to estimate the sample collected from the bank under the study. The research wanted to establish an empirical relationship that existed between Naara rural banks financial performance on one hand and its credit portfolio, liquidity, non-performing loan and total assets on the other hand. The results of the paperwork indicated that liquidity and size were positively and related considerably to the performance of the bank.In Nigeria Tesfai.A (2015) further his research works on the relationship between liquidity, capital adequacy and non- performing loans on the financial performance of Habib bank AG Zurich. The researcher employed regression analysis to investigate the association between the independent variables and the dependent variables. The study showed that there exists a positive relationship between profitability and liquidity for commercial banks. Liquidity was one of the factors that determine the profitability of commercial banks. Liquidity was noted to influence the measures of the financial performance of Habib Bank AG Zurich. The study suggested that the bank should improve their liquidity management via identifying, measuring, monitoring, and controlling liquidity risk in their bank. Additionally, finance managers should identify all the factors that influence the liquidity of their banks with the aim of developing strategies to reduce their effect. Also, the study recommended that investors should try and invest more in commercial banks with high liquidity as their financial performance is expected to increase.

2.2 Theoretical Review on the topic More organised research work on the study of bank performance started in the late 1980s (Olweny and Shipho, 2011) with the application of Market Power (MP) and Efficiency Structure (ES) theories (Athanasoglou et al., 2005.) The MP theory states that increased external market forces result in profit. Moreover, the theory suggests that only firms with large market share and well-differentiated portfolio (product) can win their competitors and earn a monopolistic profit. On the other hand, the ES theory suggests that enhanced managerial and scale efficiency leads to higher concentration and then to higher profitability. Through the research work of Nzongang and Atemnkeng in Olweny and Shipho (2011) balanced portfolio theory also added an additional dimension into the study of bank performance. It states that the portfolio composition of the bank, its profit and the return to the shareholders is the result of the decisions made by the management and the overall policy decisions. From the above theories, it is possible to conclude that bank performance is influenced by both internal and external factors. According to Athanasoglou et al., (2005) the internal factors include bank size, capital, management efficiency, and risk management capacity.

2.2.1 Pecking Order Theory As indicated by Myers and Majluf (1984) this theory works together with financial performance, estimated by financial performance and financial institution preference order for capital to finance or back up their business capital or business activities. Owing to asymmetrical or irregular information that defines the connection between the organisation and potential investors or shareholders, the financial institutions will have a preference to use retained revenue to debt, either short-run or long-run and debt over equity. It is likely that if a financial institution does not issue new security and uses the retained revenue to finance and sustain or support their investment opportunity, the information lop-sidedness problem would be worked out or solved. In firms where information asymmetry is bulky, they should issue debt to avoid selling underpriced securities. The capital structure decreasing events such as new stock offering hence leading to a firms stock price to fall or decline.

2.2.2 Modern Portfolio Theory This theory from Markowitz (1959) works together with income diversification and portfolio theory on investment approach where investor balances the risk against the expected maximum earning from the general or overall portfolio. in addition, a diversified portfolio is an effective approach to push forward or increase returns while reducing the risk associated with the investment. As such, portfolio selection strategies have gained traction in financial literature in the recent past. To this effect, a modern portfolio uses the approximate mean-variance approach to simply portfolio selection problem. Markowitz (1959) attempted to measure risk and quantitatively approve why and how portfolio diversion attempts to diminish the chance of risk for investors. The \’risk\’ of a portfolio is evaluated as a standard deviation of return from period to period, and the portfolio choice issue is reduced to computing an efficient portfolio, that is, one that minimizes the risk for a fixed level of return in a single period. As indicated by the portfolio theory, the greater the expected return the better the investment, and the smaller the standard deviation of the return the more attractive the investment. Moreover, the theory demonstrates that we can lessen the standard deviation of the return or risk by combining anti-covariant securities. Nevertheless, each asset class generally has diverse levels of return and risk and also act uniquely so that one asset may be increasing in value as another is decreasing or at least not increasing as much, and vice versa. This theory, conversely, has a deficiency; it cannot allow both more and less risk-averse investors to find their optimal portfolio, a problem surmounted by the capital asset pricing model (CAPM) Sharpe, (1964). 2.2.3 Trade-off theory The theory co-operates financial leverage influence as recommended by Myers (1984). It highlights a harmony between tax-saving arising from debt, decrease in agent cost and bankruptcy, financial distress costs and the need for an optimal capital structure (Oruc, 2009). As such, the optimal level of leverage is achieved by balancing the benefits from interest payments and the costs of issuing debt (Jahanzebet al, 2014). Sheik and Wang (2010) expressed that Trade-Off theory expected to pick a target capital structure that maximizes the firm value by minimizing the costs of current market imperfections. This theory is also referred as a tax based theory and bankruptcy costs, it believes each source of money has its own cost and return and these are the relationship with the firms earning capacity and its business and insolvency risks (Awan and Amin, 2014). In this manner, firms with more expense bit of leeway will issue more obligation to back business tasks and the expense of money related misery and advantage from assessment shield are adjusted (Chen, 2011). As indicated by Awan and Amin (2014), financial distress and agency cost theories project that higher debts bring financial distress and eventually bankrupt a firm or force it to go into liquidation or restructuring. Bankruptcy cost is a cost directly acquired when the perceived probability that the firm will default or financing is greater than zero. One of the bankruptcy costs is liquidation cost, which symbolises the loss of value as a result of liquidating the net assets of the firm. Another bankruptcy cost is distress cost, which is the cost of a firm incurs if stakeholders believe that the firm will cease to operate (Chen, 2011). From the clarifications above it demonstrates that cost of financial distress and benefits from tax shields are balanced. Ross (1977), contends debt also has numerous benefits to the firms. First, it is a valuable device for signaling by firms. He recommends that leverage will push forward a firms value because enhancing leverage is coinciding with the markets realization of value. Secondly, debt will reduce agency costs related to equity. These agency costs are such as free cash flow problem or also called over investment issue or problem (Jensen, 1986). Third, debt will lessen the agency cost of the management with the goal that it disciplines managers. Then again, debt has its own burdens: Managers acting to investors\’ greatest interest may move investment to riskier assets and the costs are incurred by the debt holders. Secondly, managers may borrow still more and payout to the shareholders, hence the debt holders suffer. Lastly, excessive debt leads to the underinvestment problem or debt overhang problem. This means that many good assignments may be passed on since more debt cannot be issued at the right time due to the current debt (Mostafa and Boregowda, 2014).2.2.4 Signalling Theory The theory works together with financial leverage, as indicated by Arrow (1972) and Spence (1973). Signaling theory assumes that the best performing or profitable organisation supply the market with positive and better information Bini et al (2011). Moreover, the signaling theory is one of the theories, which have an explanation for the relationship between financial performance and capital structure (Alkhazaleh and Almsafir, 2014). This theory presupposes that a superior capital structure is a positive signal to the market worth of the organisation or firm (Adeusi et al, 2014). The signaling theory further hypothesizes that larger part of the profitable firms signals their aggressive and competitive power through imparting new and significant information to the market. Along these lines, information is unveiled by methods for specific indicators or ratios which, mostly, measure specific conditions on which to enter into or renew the agency contract (Bini et al, 2011). As indicated by the signaling theory, the management of bank signals good future expectation by increasing capital. This indicates that less debt ratio necessarily means those banks perform better than their identical (Alkhazaleh and Almsafir, 2014). Furthermore, the theory contends that administrators or managers who unequivocally believe that their bank can beat or outsmart other banks in the banking industry will need to relay such information to different stakeholders so that they can attract additional investments. Thus, the signaling theory asserts that when a banks performance is outstanding, directors will signal the bank\’s performance to its stakeholders and market by making various disclosures which poor performing firms cannot make. By enhancing more disclosure most managers will wish to receive high benefits and a good reputation which may increase the value of the firm and financial performance (Muzahem, 2011).2.2.5 Modigliani and Miller Theory  Capital Structure This theory works together with financial leverage and a bank loan, according to Modigliani and Miller (MM) (1950). The two professors during the 1950s carried out research work on capital-structure theory intensely and from their investigation, they built up the capital-structure irrelevance proposition. Basically, they conjectured that in perfect markets, it doesn\’t make a difference what capital structure an organisation uses to fund its tasks or operations. They estimated that the market estimation or value of a firm is controlled by its acquiring power or earnings power and by the danger of its underlying assets and that its worth is independent of the manner in which it funds or finance its investments or distribute dividends. This theory stands on major assumptions which emphasis on; no taxes exist, no transaction costs, no bankruptcy costs, equivalence in borrowing costs for both companies and investors, Symmetry of market information, which implies that companies and investors have similar information and there is no effect of debt on a company\’s earnings before interest and taxes. Nevertheless, in the real world, there are taxes, transaction costs, and bankruptcy costs, differences in borrowing costs, information asymmetries and effects of debt on earnings.2.3Empirical Review  A few investigations of similar study related to the organisations financial performance have identified various elements which have influenced the progress of organisations. Limited numbers of outcomes are readily available regarding companies progress in Pakistan compared with a large number of studies conducted by foreign scholars. Some of these studies are presented below.   William (1988) brings to a close that the choice of maximum leverage reduces disagreement among managers and investors. Preceding study work generally differentiates among two kinds of organisational progress such as financial performance and innovative progress. Molyneux and Thornton (1992) examined critically the factors of the financial sectors profitability in eighteen European states from 1986 to 1989. Their researchs results indicated positive impacts on ROA and range of interest with government control. Avkiran (1995) accounted that the financial performance of the fiscal sector was determined by a mix of financial ratios, benchmarking and calculating progress against budget or a mix of these methods. Berger et al. (1995) reported and detailed that basics establishment of the operational progress of fiscal services organisations are frequently difficult to differentiate because of the untouchable product of outputs and lack of intelligibility over resource provision conclusion. Operational progress will be a herculean task of efficiency of the contractual instrument in focusing, maintaining and controlling administrative capacity in ways that capitalize investors capital. Krishnan and Moyer (1997) uncovered negative and significant association among leverage and Companys progress through additional elements significantly impacting the companys progress such as size, growth, tax, and risk. Krishnan and Moyer (1997) also discovered the negative and important connection among leverage and the companys progress through additional elements significantly impacting the companys progress such as size, growth, tax, and risk. Damanpour and Evan (1998) detailed that past research work has frequently utilised progress as a separate idea. Financial performance was frequently used in the environment of development of sales, high dividend on investment, high share prices in the market. Bashir (2000) studied so many components of the Islamic bank\’s progress between the years of 1993 to 1998. Internal and external elements were also implemented to predict productivity and effectiveness. Managing macroeconomic condition, economic marketplace position, and tax duty, the outcomes verify that a large amount of leverage and high loans to asset ratios guide to high profitability. Foreign-owned banks are more money-making in contrast to local banks. Demirguc-Kunt and Huizinga (2001) have also examined the progression of local and overseas banks in eighty (80) states. They came out with the results that profit edge, transparency operating cost, tax charges and effectiveness be different among domicile and overseas banks and originate that overseas banks perform improved in term of productivity and performance.

However, it was completely the opposite in emerging countries. Guru et al. (2002) explored the performance of seventeen (17) Malaysian clients or customers banks from 1986 to 1999 to determine their profitability performance level of Malaysian banks. There were two types of output, inside elements (liquidity, capital capacity, and cost organisation) and outside elements (liquidity, capital capability and expense administration) and outside elements (shareholder Equity, organisation size and outside financial environment).In view of the outcomes, they discovered the low-profit performance of Banks. Chowdhury (2002) found out that the banking sector of Bangladesh encompass a mix single include state-owned, and overseas customer banks. It is becoming imperative for banks to experience the stress occurring from both inside and outside elements and show to be beneficial. Neceur (2003) came out with his outcome on Tunisian banks for the period 1980 to 2000. He stated confirmatory statement to the effect of owner investment to return on assets. Spathis and Doumpos (2002) studied the effectiveness and efficiency of Greek banks based on their property size. They exerted multiple approaches to classify Greek banks according to the profit and the way of their operation elements and to demonstrate the difference between banks productivity and competence among small and large banks. Muhammet Mercan et al (2003) explored the economic progress index of Turkish commercial banks from 1989 to 1999. They displayed the effects of range and means of shareholder possession of banks with the financial performance of banks. Mazhar M. Islam (2003) revealed growth and progress of local and overseas banks in the Arab Gulf States which give an explanation that local and overseas banks in these states have operated well more than last several years. They make public that banks in these countries are well developed and the banking industry is booming with strong rivalry amongst banks. Adams and Buckle (2003) carried out a study on factors of organisation day to day progress in the Bermudian insurance marketplace. They suggested that firms with high leverage, low liquidity and reinsurers are better off in terms of operational performance. Goddard et al. (2004) advanced in the study of European financial institutions; they examined the moderately feeble connection among size and profitability calculated by the return on equity. The British financial institutions display a positive correlation among off-balance-sheet trade and profitability.The researcher will likewise re-evaluate the literature on the impacts of the independent factors on the financial performance of commercial banks. The literature on the subject matter was carried out by different scholars and was explored on all the independent variables under the review. By and large, the financial performance of commercial banks in Nigeria has been on the road to recovery during the last ten years.

Nonetheless, not all commercial banks have been witnessing the improvement. A number of banks have been experiencing losses (Oloo, 2010) along the study period of five years. The empirical review will center on the effects of capital adequacy, asset quality, management efficiency, earnings ability and liquidity on bank performance.

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