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ABSTRACT
This study examined the effect of liquidity management on the financial performance of Deposit Money Banks in Nigeria. Specifically, it investigated the effect of liquidity ratio, cash reserve ratio, loan-to-deposit ratio, and capital adequacy ratio on financial performance measured by return on assets. An expost facto research design was adopted using secondary data obtained from the annual reports of thirteen (13) listed Deposit Money Banks in Nigeria covering the period 2016 to 2025. Descriptive statistics, correlation analysis and random effects regression were employed for data analysis. The findings revealed that liquidity ratio had a positive and significant effect on financial performance, while cash reserve ratio had a negative and significant effect. Loan-to-deposit ratio showed a positive but insignificant effect, whereas capital adequacy ratio had a positive and significant effect on financial performance. The study concluded that effective liquidity management plays a vital role in improving the financial performance of Deposit Money Banks in Nigeria. It therefore recommended that bank management should maintain an optimal level of liquidity, efficiently manage cash reserves, strengthen their capital base, and adopt sound liquidity management policies to enhance profitability and ensure long-term financial stability.
Keywords: Liquidity Management, Financial Performance, Deposit Money Banks, Liquidity Ratio, Capital Adequacy Ratio.
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