RISK MANAGEMENT AND FINANCIAL PERFORMANCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract This study investigated the effect of risk management practices on the financial performance of listed deposit money banks in Nigeria between 2011 and 2023. Risk management practices were proxied by risk management committee independence (RMCI), risk management committee size (RMCS), and risk management committee financial expertise (RMFEX), while financial performance was measured using return on equity (ROE). Market capitalization (MCAP) was incorporated as a control variable. Data were analyzed using pooled ordinary least squares (OLS) regression, with diagnostic tests conducted for multicollinearity, normality, and heteroscedasticity. Due to heteroscedasticity in the OLS model, robust regression estimation was adopted for reliable inference. The hypotheses were tested using robust regression results. The first hypothesis (H01), which stated that RMCI has no significant effect on ROE, was rejected as RMCI exhibited a significant negative effect on performance [coef. = -0.069; p = 0.003]. The second hypothesis (H02), which stated that RMCS has no significant effect on ROE, could not be rejected since RMCS showed an insignificant negative relationship [coef. = -0.299; p = 0.196]. The third hypothesis (H03), which stated that RMFEX has no significant effect on ROE, was rejected as RMFEX had a significant positive impact [coef. = 0.847; p = 0.030]. Market capitalization also demonstrated a strong positive effect, confirming that larger banks tend to perform better financially. The findings suggest that committee independence, while useful for oversight, may undermine profitability when excessive independence creates rigidity in decision-making. Committee size alone does not significantly determine financial performance, indicating that effectiveness depends more on the quality of deliberations than numerical membership. In contrast, financial expertise emerged as a critical driver of performance, highlighting the importance of technical competence and professional knowledge in risk oversight. These results reinforce the view that governance structures without substantive capabilities may have limited impact on bank profitability. The study concludes that effective risk management in Nigerian banks depends more on the expertise of committee members than on their independence or committee size. It recommends that banks prioritize appointing members with strong financial backgrounds such as accountants and risk professionals, while regulators should ensure that independence requirements are complemented with competence thresholds. This will enable risk management committees to function as substantive governance mechanisms that enhance profitability rather than as formal structures for compliance alone