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ABSTRACT
In an environment where persons are looking to make as much money by less stressful means as possible and are readily interested in making the right investments and the banking sector introducing new schemes to woo customers, these persons are interested in knowing where best to invest their money. This research was carried out to give liable investors a metric to base their investment decision making.
In the course of this research, we leverage on the signaling theory of bank performance which suggests that high capital is a positive signal to the market of the value of a bank. We related the capital at the beginning of the year of our bank of study, that is, the First Bank of Nigeria, plc to the income generated at the end of the year using a Finite Distributed Lag model which is a regression model of a dependent variable on current and lagged behind values of an explanatory variable. In our case, the annual income is the dependent variable and the capital at the beginning of the year is the explanatory variable. The model considers the current and 5 lagged behind values of the capital at the beginning of the year. The dataset used for the research was collected using a secondary method of data collection from the financial statements found on the published annual reports of First Bank, plc.
The Almon technique was used in estimating the parameters of the model. After we ensure that the dataset is stationary by the use of the difference transformation method, we proceeded to fit the dataset using the distributed lag model function in the R programming language environment and made forecasts 3 of future values of the annual income if First Bank, plc.
