Abstract
The failure of many seemingly healthy businesses with substantial asset bases to meet their
short-term commitments demonstrates the critical need for efficient liquidity management
strategies. The main objective of this research therefore was to evaluate the effect of liquidity
risk management on financial performance of listed deposit money banks in Nigeria. The
variables of this study were liquidity risk management (liquidity coverage ratio, cash to deposit
ratio, liquid assets ratio, loan to deposit ratio and capital adequacy ratio) and financial
performance measured with return on equity. The research design adopted for this study was
ex post facto, secondary data were used and the population of the study was 7 deposit money
banks with international authorization. Census sampling technique was employed and the 7
banks constituted the sample size of the study. Panel least square regression was used to test
the hypothesis and STATA 17 was the statistical tool used to analyse the study. The findings of
the study revealed that liquidity coverage ratio (coef. = 0.000[0.604]) has no significant effect
on return on equity; cash to deposit ratio (coeff. = -0.169[0.028]) has significant negative
effect on return on equity; liquid assets ratio (coeff. = -0.033[0.957]) has no significant effect
significant effect on return on equity; loan to deposit ratio (coeff. = -0.111[0.034]) has negative
significant effect on return on equity; and capital adequacy ratio (coeff. = 2.489[0.009]) has
significant positive effect effect on return on equity of listed deposit money banks in Nigeria. It
was thus concluded that liquidity risk management alone cannot significantly influence
financial performance of banks in Nigeria. Based on the findings, it was recommended among
others that deposit money banks should minimize idle cash holdings and invest surplus funds
in profitable ventures to improve returns. Also, banks should sustain strong capital buffers to
enhance financial stability and boost shareholder returns.