KOCHA, Chukwunenye N.
Department of Banking & Finance
Rivers State University, Port Harcourt
nenyekocha1@gmail.com
ABSTRACT
This study investigated the extent to which monetary policy shocks affect financial performance of listed
deposit money banks in Nigeria using both the conventional (static) and dynamic single-equation panel data
methods. The study proxied monetary policy shocks with monetary policy rate and interbank call rate, while
financial performance was proxied by market value per share. The study involved 12 listed deposit money
banks and cover the period from 2010 to 2021. Specifically, the empirical analysis was based on pooled
regression, fixed effects and random effects methods; while the robust analysis was based on Differenced
Generalized Method of Moment DGMM. The model selection was based on the Likelihood Ratio test and
Hausman specification test. The study found that the specified model is consistent with random effectstheory.
Further, our analysisshowsthat market value pershare is persistent and can be predicted on the basis of its own
immediate history; and that while monetary policy rate has positive and significant impact on bank financial
performance, interbank call rate has a positive but weak significant impact on bank financial performance.
Our estimated DGMM model for the relationship between monetary policy shocks and bank performance has
no specification problem, and hence our results are empirically valid. The theoretical and practical implications
of these findings are discussed.
Keywords: DGMM, inflation, interbank call rate, monetary policy rate, panel data