MODERATING EFFECT OF CAPITAL ADEQUACY RATIO ON THE RELATIONSHIP BETWEEN LIQUIDITY MANAGEMENT AND VALUE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study investigates the moderating effect of capital adequacy ratio (CAR) on the relationship between liquidity management and value among listed deposit money banks (DMBs) in Nigeria. A longitudinal research design was employed, analyzing data from annual reports of eleven selected Nigerian deposit money banks listed on the Nigerian Exchange Group (NGX) from 2013 to 2022. Panel regression analysis was used has a technique of data analysis. Findings reveal that effective liquidity management, as indicated by current and deposit to assets ratios, positively correlates with increased firm value. The study further demonstrates that CAR significantly moderates the relationship between liquidity management and firm value of listed DMBs in Nigeria. The study concludes effective management of liquidity metrics positively influences firm valuations by enhancing the bank's ability to meet short-term obligations and manage financial risks, with the Capital Adequacy Ratio (CAR) playing a crucial role in moderating this relationship and amplifying the positive impact on firm value through robust capital reserves. Based on the findings the study recommends that the regulatory authority such as Central Bank of Nigeria (CBN) should strengthenoperationalframeworksformonitoringandoptimizingliquidityratiosto ensure adequate cash flow management and risk mitigation. Also the management of DMBs in Nigeria should maintain capital buffers above regulatory requirements to support growth initiatives, manage risks effectively, and enhance stakeholder confidence. By implementing these recommendations, banks can strengthen their competitive edge and contribute to a resilient and prosperous banking sector in Nigeria.