Journal of Finance and Investment Analysis

Bank Recapitalization and Lending Behaviour: A Pragmatic Evident from Nigeria Banking Sector

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• Abstract

  The literature perception demonstrates that both theoretical and empirical studies present contradictory predictions about the association between level of capital and lending behaviour in the banking system of developed countries. Based on this fact, this study examined the effect of bank recapitalization on lending activities in Nigeria banks. Twenty-two (22) banks that finally emerged from the recapitalization exercise were the banks used for the study. Structured questionnaire were administered to two top echelons of each bank and data collected was analyzed with the aid SPSS. Regression analysis and Correlation co-efficient (r²) confirmed the formulated propositions. Results revealed that bank recapitalization has influenced the ways and manners banks react to lending and that well capitalized bank is procyclical to borrower because they suffer less from non performing loans. The study concluded that recapitalization has enhanced lending to the productive sector of Nigeria economy and therefore recommended that the exercise should be review in the future to keep peace with trend.