AKANI, Elfreda Nwakaego
Department of Banking and Finance, Rivers State University, Port Harcourt
and
KUROTAMUNOBARAOMI, Tamunosiki
Port Harcourt Polytechnic, Port Harcourt
ABSTRACT
This study empirically investigated the relationship between risk management strategies and capital investment decisions of deposit money banks in Nigeria by utilising risk diversification, Basel compliance, risk transfer, credit securitisation, risk retention and risk evaluation as proxies for risk management strategies, while long term investment served as a measure of capital investment decisions. Secondary panel data for 13 quoted banks that span 2009 to 2018 were sourced from the annual reports of the respective financial institutions and analysed by econometric analytical techniques that include panel regression models, cointegration and causality test. From the results it was found that all 6 endogenous variables but risk retention have insignificant relationship with capital investment decisions. It was also observed that while credit securitisation has inverse relationship with capital investment decisions, the other predictor variables are directly related with the exogenous variables. The Pedroni panel cointegration showed existence of long term relationship between the variables, while the causality test found uni-directional causal relations from: capital investment decision to risk diversification, credit securitisation to capital investment decisions, and capital investment decisions to risk retention. Consequently, it is recommended (among others) that to mitigate the riskiness of banking operations, more avenues for risk diversification should be explored, although Basel compliance enhances portfolio investment decisions, its implementation should be done cautiously and in consideration of the intricacies and peculiarities of the Nigerian banking space, beyond the statutory and regulatory enactments that propel risk transfer by way of insurance, commercial banks should voluntarily seek insurance.Keywords: Credit securitisation, investment decisions, risk retention, risk strategies