Accounting Information and Deposit Money Banks Lending Decision

ABSTRACT

The study investigates the nature of relationship between accounting information and deposit money bank lending decision in Nigeria.

Expost facto research design was adopted and secondary data were sourced from the annual reports of the fourteen (14) deposit money banks and all the thirteen (13) industrial goods companies listed on the Nigerian Stock Exchange as at 31^st December, 2018. Ordinary Least Square regression (OLS) and T-statistic techniques were used to analyse the data of the study.

The results from the findings of the analyses showed that cash availability was found to exert a positive and significant relationship with deposit money bank lending decision. Borrowing firms’ characteristics was found to exert a negative but significant relationship with deposit money bank lending decision. Also from the finding, Statement of financial position was found to rank first among the three popularly used financial statements; followed by statement of cash flow which comes second in the ranking and finally, income statement which is the least ranked among the financial statement.. Based on these findings, this study recommends that cash availability is an element that should not be undermined by deposit money banks. Therefore there should be a constant check on the minimum reserve that is kept in the bank. Also, borrowing firm characteristics should not be solely relied on as a major determinant of deposit money bank lending decision. Finally, deposit money banks should make statement of financial position and statement of cash flow mandatory as part of the requirements from loan applicants. On the other hand, income statement should not be solely depended upon when making lending decision and as such should not be mandatory as part of the requirements from borrowing firm in lending decision.