TRANSLATION EXPOSURE AND PERFORMANCE OF DEPOSIT MONEY BANKS: EVIDENCE FROM NIGERIA

Abstract

The increasing dealings in foreign exchange by commercial banks with foreign subsidiaries expose their performance to the sensitivity of change in real domestic currency. However, studies on the effect of translation exposure on deposit money banks performance in Nigeria are limited. Therefore, this study examined the effect of translation exposure on performance of deposit money banks in Nigeria. This study used ex-post facto research design and utilised panel data using Nonlinear Auto Regressive Distributed Lag (NARDL) model covering a period of sixteen years (2004-2019). The study found out that translation exposure has an asymmetric impact on financial performance for deposit money banks in Nigeria and thus concluded that translation exposure has a positive and significant effect on performance of deposit banks in Nigeria. The study recommended that bank managers should encourage periodic assessment of the banks statement of financial position.