Title: The anatomy of banking firm financial condition

Authors: Jonathan Njoku, Eno L. Inanga

Addresses: Kuwait-Maastricht Business School, Kazima Street, Block 3, Dasma, P.O. Box 9678 Salmiya, 22097 Kuwait. ' Maastricht School of Management, Endepolsdomein 150, 6229 EP Maastricht, Postbus1203, 6201 BE Maastricht, The Netherlands

Abstract: This study employs factor analysis to develop a conceptual model of bank financial condition from financial ratios and other characteristics in Nigerian banking. It paints the anatomy of the phenomenon in a conceptual model around the prudential application of market power and market presence to transform deposit mobilisation, under a given macro-economic condition, into earnings quality with capital boosting confidence. The finding is relevant in the understanding of the 2008 global financial crisis. In the context of the global macro economy, the framework casts the current global financial meltdown in the light of the failure of market power and market presence to transform deposit mobilisation into earnings quality as imprudence stretched the sub-prime mortgage and credit default swap risks. Since capital could not offer cushion, confidence fell and bank financial condition grew worse.

Keywords: Nigerian banking; fragility; CAMEL(S) risk; run; contagion; bankruptcy; bank ratio; global financial crisis; credit default swap; bank distress; sub prime mortgage; burden; Nigeria; factor analysis; bank financial conditions; financial ratios; market power; market presence; deposit mobilisation; earnings quality.

DOI: 10.1504/IJEA.2010.036807

International Journal of Economics and Accounting, 2010 Vol.1 No.3, pp.284 - 311

Published online: 09 Nov 2010 *

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