EFFECTS OF 2008 GLOBAL FINANCIAL CRISIS ON THE PERFORMANCE OF BANKS SHARES TRADED IN STOCK EXCHANGE MARKET IN NIGERIA.

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EFFECTS OF 2008 GLOBAL FINANCIAL CRISIS ON THE PERFORMANCE OF BANKS SHARES TRADED IN STOCK EXCHANGE MARKET IN NIGERIA.

ABSTRACT

 

The global financial crisis of 2008 is an event that affected the entire world economic cycle, the consumers, producers, financers and other parties that constitute the economy. The crisis was as a result of liquidity, currency, fluctuations of Banks Share Prices and risks in business with Banks, which started from major financial institutions of the US and spilt over to the rest of the world. These gave birth to the same situations in Nigeria where investors, Bank customers and other citizens were looking at the problems in the financial sector from either political dimensions or from misconceptions about Western economic policies that had dominated Nigeria economic system. The general objective of this study was to investigate the effects of the global financial crisis of 2008 on the performance of bank shares traded in the Stock Exchange Market of Nigeria.  The specific objectives were to establish the effects of the GFC on liquidity performance, currency performance, price fluctuations and risk fluctuations in business with banks and measure the price performance of the industry. The study used documented guide line review as instrument in collecting secondary data from audited financial statements of all the 18 money deposit Banks operating 2006 and 2010. Other data collected using same instrument were stock price index reports, control interest rate prices reports, exchange rate reports, value of shares price used for loans collateral reports, annual activity reports on market transaction and other relevant financial policy information from the controlling authorities, such as Central Bank of Nigeria (CBN), Security and exchange Commission (SEC) and Nigeria Stock Exchange Market (NSEM). Data was analyzed using comparison of two sample t test means and variance and sign test was used for testing the hypothesis on each supportive independent variable at a 0.05 level of significance. The results indicated that all the null hypotheses are rejected meaning that 2008 GFC had impact on performance of bank share traded in NSEM. The following recommendations were given as solutions. It is advised that the Federal Government of Nigeria through its control agency mandate all the money deposit banks to keep one quarter of their saving deposits with CBN. This should be different from cash deposit reserved deposit and strictly applicable to saving accounts redeemable bi-annually and should attract a reasonable interest accruable. Another recommendation is that of  raising of reserved deposit with at least 50% from it present status at corporate finance level of all the money deposit banks; CBN should also increase in it inspections excises to at least four times in a year which will cover each quarter. Also CBN were advised to reduce the interest rate and improve the interest rate given on saving deposit and many more recommendations .Finally the following can be further exploit by other researchers. For example the term performance from financial perspective is not restricted to above independent variables neither it is not from the supportive, therefore other areas of performance like banks capital strength, branch networking level of technology, assets strength and others can be study.

 

TABLE OF CONTENTS

DECLARATION ……………………………………………………………………………………………… II

ACKNOWLEDGEMENT ………………………………………………………………………………… IV

TABLE OF CONTENTS ………………………………………………………………………………….. VI

OPERATIONAL DEFINITION OF TERMS ………………………………………………………. IX

LIST OF ABBREVIATIONS AND ACRONYMS ………………………………………………… X

ABSTRACT ……………………………………………………………………………………………………. XI

CHAPTER ONE…………………………………………………………………………………………………. 1

INTRODUCTION………………………………………………………………………………………………. 1

1.1 BACKGROUND OF THE STUDY…………………………………………………………………………. 1

1.2 STATEMENT OF THE PROBLEM………………………………………………………………………… 8

1.3 OBJECTIVES OF THE STUDY…………………………………………………………………………… 10

1.3.1 Specific objectives………………………………………………………………………………… 10

1.4 RESEARCH HYPOTHESIS………………………………………………………………………………. 11

1.5 SIGNIFICANCE OF THE STUDY………………………………………………………………………… 12

1.6 SCOPE OF THE STUDY…………………………………………………………………………………… 14

1.7 LIMITATIONS OF THE STUDY…………………………………………………………………………. 14

1.8 ORGANIZATION OF THE STUDY………………………………………………………………………. 16

1.9 RESEARCH ETHICAL PROCEDURE AND CONSIDERATION…………………………………….. 16

CHAPTER TWO………………………………………………………………………………………………. 18

LITERATURE REVIEW………………………………………………………………………………….. 18

2.1 INTRODUCTION…………………………………………………………………………………………… 18

2.2 EMPIRICAL LITERATURE………………………………………………………………………………. 18

2.2.1Concept of Financial Crisis……………………………………………………………………… 18

2.2.2Evolutionary Trend of the Global Financial Crisis……………………………………… 22

2.2.3 Effects of the crisis to the world economy……………………………………………….. 26

2.2.4 Nigeria banking sector after the pronouncement of the 2008 GFC…………….. 27

2.3 THEORETICAL LITERATURES ON MODELS……………………………………………………….. 34

2.3.1 Walter James Approach Model………………………………………………………………. 34

2.3.2 Gordon Growth Model………………………………………………………………………….. 36

2.3.3 Modigliani and Miller (MM hypothesis Model)……………………………………….. 37

2.3.4 Event Study Model……………………………………………………………………………….. 39

2.4 EMPIRICAL LITERATURE ON GLOBAL FINANCIAL CRISIS…………………………………… 40

2.6 CONCEPTUAL FRAME WORK………………………………………………………………………….. 47

CHAPTER THREE………………………………………………………………………………………….. 49

RESEARCH METHODOLOGY……………………………………………………………………….. 49

3.1 INTRODUCTION…………………………………………………………………………………………… 49

3.2 STUDY DESIGN…………………………………………………………………………………………… 49

3.3 RESEARCH PHILOSOPHY………………………………………………………………………………. 50

3.4 TARGET POPULATION………………………………………………………………………………….. 51

3.4.1 Data sources……………………………………………………………………………………….. 51

3.4.2 Data Collection Instrument……………………………………………………………………. 51

3.5 DATA COLLECTION PROCEDURE……………………………………………………………………. 52

3.6 TESTING OF VALIDITY AND RELIABILITY OF THE INSTRUMENT………………………….. 52

3.7 OPERATIONALIZATION OF THE VARIABLES……………………………………………………… 53

3.8 MODELLING AND DATA ANALYSIS PROCEDURE……………………………………………….. 56

3.8.1 Average Returns…………………………………………………………………………………… 57

3.8.2   Sign Test……………………………………………………………………………………………. 57

3.9 DATA ANALYSIS PROCEDURE AND INTERPRETATION………………………………………… 57

CHAPTER FOUR…………………………………………………………………………………………….. 59

RESEARCH FINDING AND DISCUSSION……………………………………………………… 59

4.1 INTRODUCTION…………………………………………………………………………………………… 59

4.2 DESCRIPTIVE STATISTICS……………………………………………………………………………… 59

4.3 EMPIRICAL FINDING……………………………………………………………………………………. 60

4.4 LIQUIDITY CRISIS……………………………………………………………………………………….. 61

4.4.1 Saving Deposit…………………………………………………………………………………….. 63

4.4.3 Cash Repatriation (cash due from other Banks and to other Banks)…………… 71

4.5 CURRENCY CRISIS………………………………………………………………………………………. 73

4.5.1 MONEY IN CIRCULATION…………………………………………………………………………… 75

4.5.2 Exchange Rate…………………………………………………………………………………….. 77

4.5.3   Transfer of funds (investment in Security)……………………………………………… 82

4.6 FLUCTUATION OF SHARE PRICE…………………………………………………………………….. 85

4.6.1 Price Index………………………………………………………………………………………….. 85

4.6.2 Volatility (Volume of bank share)…………………………………………………………… 89

4.5.3 Volatility (Value of bank share)……………………………………………………………… 92

4.7 FLUCTUATION OF RISK IN BUSINESS WITH THE BANK……………………………………….. 94

4.6.1 Interest Rate………………………………………………………………………………………… 95

4.6.2 Banks Shares as Security Collateral for Loan………………………………………….. 99

4.8 PERFORMANCE OF BANKS SHARES PRICES IN NSEM……………………………………… 103

CHAPTER FIVE…………………………………………………………………………………………….. 111

SUMMARY, CONCLUSION AND RECOMMENDATION…………………………….. 111

5.0 INTRODUCTION…………………………………………………………………………………………. 111

5.1 SUMMARY……………………………………………………………………………………………….. 111

5.2 CONCLUSION……………………………………………………………………………………………. 114

5.3 POLICY RECOMMENDATIONS………………………………………………………………………. 116

5.4 RECOMMENDATIONS FOR FURTHER RESEARCH………………………………………………. 118

5.5 STUDY CONTRIBUTION TO KNOWLEDGE……………………………………………………….. 119

REFERENCES……………………………………………………………………………………………….. 121

APPENDICES………………………………………………………………………………………………. 129

LIST OF MONEY DEPOSIT BANKS IN NIGERIA (APPENDIX A)…………………….. 129

DOCUMENTED GUIDE LINE (APPENDIX B)………………………………………………….. 130

 

 

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Historical evidence shows that the financial crisis in the world economy is not a new issue but an event that recurs after a long period of time.  Characteristically this crisis directly or indirectly affects banks and manufacturing firms financially, and cripples their production and   consumption level (Sanusi, 2012), Kwanashie, (2008) holds a similar opinion to Sanusi (2012) but also believes that global financial crisis is an event, which lead to the downfall of larger firms and producers while its effects spill over to multinational companies with businesses across the globe.  These effects are reflected by company shares performance in stock exchange markets across the globe.

 

Bush (2008) described global financial crisis as an economic controversial period where value and volume of economic activities in explicably and rapidly dropped down to an unexpected level, especially quoted equities prices, of which bank shares are inclusive. In his acknowledgment, Oguz (2012) recognized the following  factors as global financial crisis;  fragility of  banking system, inflation trend,  devaluation of local currency, Foreign trade  deficit,  bad loan  recorded by the financial institutions,  increased in money supply without  taking other economic factors  in to  consideration,  excess  spending  on  unprofitable business in the  short (e.g spending on war in other  countries by super powers) poor economic policy, intervention in the internal politics of other countries and  other  factors that threatening the world economy, through various ways of which stock exchange market activities is one of them.

 

 

According to Tobat and Akbar (2008) the global financial crisis of 2008 was the worst of its kind since the Great Depression of the 1830s and 1930s. It became prominently visible in September, 2008 with the failure; merger and conservatorship attitude of several large United States based financial firms. The underlying causes leading to the crisis had been reported in various business journals for many months before September 2008, with commentaries about the falling of banks stock prices, lower production capacity by firms and higher cost of goods due to higher level of demand by the society being some of the causes cited. (McClure 2008, Morton 2008).

 

The financial instability of leading USA and European investment banks, insurance firms and mortgage banks, consequent to the subprime mortgage crisis are the root of the event from a global perspective (Evans-Pritchard and Ambrose, 2007). Beginning with failures of large financial institutions like banks, insurance companies, brokerage  firms and others in the United State,  it rapidly evolved into a global crisis resulting in a numbers of  European banks failing as well as decline of various stocks indices, and large reductions in the market value of equities (stocks) and commodities worldwide (Norris, 2008)

 

The crisis led to a liquidity problems and the de-leveraging of financial institutions especially in the United States and Europe, which further accelerated the downfall in banks savings deposit profile, and forced banks to withdraw excess cash from their cash reserved deposit accounts in Central Banks. It also increased cash request level commercial banks, which financial experts and monitory economies considered a liquidity crisis. World political leaders, national Ministers of Finance and Central Bank Directors coordinated their efforts to reduce fears of the crisis but the problems continued, evolving at the close of October, 2007 into a currency crisis with investors transferring vast capital resources (through money circulation at local level and foreign exchange at international level) into stronger currencies such as the Japanese yen, China Yuan, India rupees Brazilian Real, the dollar and the Swiss franc. These lead many emergent economies to seek aid from the international Monetary Fund (Frank, 2008)

 

There is concerned that those responsible for the financial problems are normally the ones being bailed out; a global financial meltdown will affect the lives of everyone in an increasing inter-connected world. The problems could have been avoided, if ideologues supporting the current economic models were not so vocal, influential and inconsiderate of others‟ views (Anup, 2008). The economic slowdowns in the United States and Europe were dragging on Asia‟s biggest economies like Japan, China, and South Korea. The worry was it could get worse. The fears highlighted were the growing realisation that

Asian economies could not cope because of their long term dependence on the US market

(Andrew, 2008).

 

Although there are a number of credible pointers to the decline of America‟s global economic hegemony, the now nearly global reach of what was essentially an American financial crisis suggests that America still remains one of the most powerful economies in the world, and that its performance is still the single most-important heath barometer of the global economy. Against the background of intimate and complex interdependences between United States of America and  developing  countries of the world from contemporary era, it seems that the post-second world war popular adage which says that

“when America sniffs, the rest of the world catches a cold” is still relevant and very valid. The developing and under developing world in general and Nigeria in particular have always been hard hit by almost every  global economic crisis that has occurred in recent history, including the global energy and debt crunch of the 1970s. Fears are therefore rife that “when America‟s sniffing causes a cold in the rest of the world, the developing world generally, and Africa in particular, risks finding itself in intensive care unit (ICU) Brenda (2006), as cited in Francis (2008)

 

The global financial crisis has no immediate impact on the developing countries including those of Asia and some part of Africa. It is conceptually noticeable that this time around, the industrialized economies of the Brazil, China, India, Japan, South Africa and Kenya appear to have borne the greater brunt of the crisis prior to it occurrence by introducing an emerging economic policies that blocked the courses of the crisis from United State of America (USA) and European countries. This notwithstanding, there is consensus that even those countries mentioned were affected by the crisis but indirectly because of their  Asian rather than European international linkages  more of Asian than Europe. Countries in Africa, and Nigeria specifically, would not escape the global financial squeeze, particularly in light of the administrative policies, fragile economic, social and political realities that prevail in Nigeria; continued dependence on USA in terms of development assistance, technology import and the fact that it is a favoured destination of the European exports.  Hence, the need to interrogate the social and economic impact of the global financial crisis on developing countries generally,   specifically Nigeria (Francis, 2008)

 

The current financial depression has evolved differently from other major crises that hit the developing world in recent decades. Firstly, it is occurring in a world of unprecedented financial globalization, where the financial sector and banking industry in Nigeria plays a historically large role in economic activity.  The crisis also comes on the heels of a major global shocked from high food and fuel prices across the globe that has imposed a heavy economic burden on many countries in Africa that faced internal problems and Nigeria specifically, and this has  is significantly increased the incidence of poverty, insecurity and political vulnerability. Sao (2008)

 

There was panic in almost all the financial markets across the globe where investors began to take their money out of risky mortgage bonds. All these happenings worked together to bring about credit squeeze ravaging not only the economy of the United States,  but the global economy as well. The situations in Nigeria created a deleterious impact on the country‟s economy, and especially on the financial system which is of second important to oil exploration in the country economy.  Ujunwa (2011) is of the opinion that most of these problems were reflective of panic reaction by the policy makers and politician‟s, however he could not explain the degree to which this affected the banking sector and the economy which is what this research will investigate.

 

Nigeria Stock Exchange Market (NSE) witnessed unprecedented growth in total market capitalization and value of shares traded between 2004 up to the second quarter of 2008, immediately the crisis was pronounced in July, 2008 in USA, the Nigerian stock market started experiencing a serious downturn, activities. Udeme (2009) said the market capitalizations of listed equities is more than 303 number with value of more than 10.18 trillion Naira in 2004 and continued to appreciate to 12.4 trillion in march 2007 which is the higher record achieved within 48years of the market operation but this drastically dropped down to 3.2 trillion Naira by the end of the year 2008. Similarly the share index dropped from 63,016.60 margins before the crisis was pronounced to 31,450.78 during last trading week of 2008.One of the reasons for this was the slow implementation of the Economic Reconstruction Committee Report given to Federal Government on how to improve the general economic status of the nation (Badayi, 2009)

 

It is also observed that, investors were pulling out their resources which made the stock prices generally to go down in particular bank stocks. Onafonokon (2009) also said “apart from bank‟s investments in the stock market through their subsidiaries some of the banks also have direct exposure to the market because they have given out facilities and loans backed up by the banks shares as collateral, then the value of the shares collapsed. This meant that collateral was and the security cannot unable to cover the loans.

 

According to  Dalhat (2009) “as the security collapsed and  capital  been invested in that direction,  if there is no additional collateral that can support the existing once then the firm is likely to fail” that is why some banks have no option but to be acquired by,  or merged with others for survival. As the crisis in Nigerian continued to worse due to huge and past withdrawals   of cash and selling of stocks by the internal and external investors, who feared for their future due to negative reports by financial analysts and expert. This drew the attentions of the government, which reacted quickly by injecting more capital into stock market and banks as an interim measure to restore investors confidence (Bayagbon, 2009 And Oluseyi, 2009). In early 2010 government instructed the NSE through SEC to reduce their operations cost by 50% as a measure to deal with the crisis.

 

Sanusi (2009b) further lamented that, the hit of GFC in Nigerian banking sector exposed the weakness‟ of most of the Nigerian Banks in an area of risk management and corporate governance because more than half of Nigerian Banks have a high level of non performing loans accounts which draw unrealistic interest in to their P&L account which is a trap to attract investors and improved in their stock price value. Eventually the present crisis came and exposed the bank syndicates which finally led to a complete crash of the stock prices.  Investors in banks stocks and the SEC were highly affected as well as the economy in general. As a result of this calamity, the government and its Central Bank came up with several measures, including some unconventional once to deal with the crisis. The aim was to bring  financial institutions and market to a stage where public confidence would be restored and banks would to resume their intermediation role through normal lending activities within the legal  financial  of operations framework.

 

Noticeable effect of the crisis in Nigerian banks are lower deposit commitment by the customers, lower  capital flows through lending activities, poor foreign exchange earnings and general shortage of cash volume for banks. This situation nearly obliterates the financial system because of limited integration with the global financial market. The crisis caused Nigeria‟s financial controllers decisively intervention to mitigate the emerging crisis effects on the public, because banks shares were no longer

valuable.(Sanusi, 2009).

 

Al- faki (2008) a financial analyst said “there is great improvement in NSEM in the  first and second quarter of 2008 financial stock trading with capitalizations of over 13.0 trillion in January to June, 2008, but within short time the figure suddenly dropped to 7.2 trillion before the end the year 2008.The continued depressions of the capital market  led to greater loss  by the banks, owing to the significant exposure through merging lending and share backed collateral lending thereby depressing profitability and weakening  lending ability. In the researcher opinion this is gaps need to be address.

 

1.2 Statement of the Problem

According to Tobat and Akbar (2008), the global financial crisis of 2008, which was pronouncement on July 2008, was the worst of its kind since the Great Depression of the 1830s and 1930s. It became prominently visible in September, 2008 with the failure; merger or conservatorship attitude of several large United States financial firms. According to McClure (2008) and Morton (2008) the underlying causes leading to the crisis had been reported in various business journals for many months before September

2008 (Chicago Stock trading Journal  Volume 5(2) of 2008 and American Bulk Journal

Volume  4(18) of 2007 and weekly Trading Journal  Vol1(12) of 2008), such articles also provide commentaries about the falling of banks stocks prices, lower production capacity by firms and higher cost of goods due to higher demand by the society as  arising from

the crisis.

 

The financial instability of leading United States and European investment banks, insurance firms and mortgage banks, consequent to the subprime mortgage crisis was the root of the event (Evans-Pritchard and Ambrose, 2007). Beginning with failures of large financial institutions like banks, insurance companies, brokerage firms and other businesses in the United States,  it rapidly evolved into a global crisis resulting the failure of  in a number of European banks, decline in various stock indices, and large reductions in the market value of equities (stocks) and commodities worldwide (Norris, 2008) .

 

Ujunwa (2011) is of the opinion that the crisis was a result of panic reaction by the policy makers and politicians who were under pressure. However, he could not explain the degree of the effect to the economy. Nigeria Stock Exchange Market witnessed unprecedented growth in total market capitalization and value of shares traded between 2004 to the second quarter of 2008, immediately the crisis was pronounced in July, 2008 the market started experiencing a serious downturn in its activities.  Udeme (2009) said that the market capitalization of listed equities are more than 303 in number with value of 10.18 trillion Naira in 2004, which continued to appreciate to 12.4 trillion Naira in March, 2007; the highest record achieved in 48 years of the market operation. He however noted that the market capitalization dropped to 3.2 Trillion Naira by the end of the year 2008. Similarly the share index dropped to 31,450.78 margins within the same year. Sanusi, (2009b) further lamented that, the Global Financial Crisis (GFC) added value by exposing the general weaknesses of most of the Nigerian Banks in terms of risk management and corporate governance.  One of the noticeable effects of the crisis in Nigerian banks was lower level of savings deposit, lower capital flows through lending activities, poor foreign exchange earnings and general shortage of cash volume for banks primary obligations .This situations nearly obliterated the entire financial system because of the limited integration with the global financial market.

 

According to Anup (2008), Nigeria as one of the largest economies in Africa and indeed the world, with direct and indirect connections in terms of banking business, had to must be a victim of the crisis. However the nature, extend and consequences may not be fully understood. Yet effects on banks activities trickle down to the entire economy. The effects of 2008 global financial crisis in European countries have been documented through research yet, not much evidence of systematic documentation exists about the African market in general and Nigeria in specific

 

1.3 Objectives of the study

The general objective of this study was to determine the effects of 2008 global financial crisis on the performance of banks shares traded in stock exchange market in Nigeria

1.3.1 Specific objectives

The specific objectives were-:

  • To establish the effects of the liquidity crisis on the performance of banks shares traded in NSEM
  • To determine the effects of the currency crisis on the performance of banks shares traded in NSEM
  • To establish the fluctuations of share prices  on the performance of banks shares  traded in NSEM
  • To determine the risk taken in  business with banks shares traded in NSEM
  • To examine the banks share price performance before and after the crisis in

NSEM

 

1.4 Research Hypothesis

The following research hypothesis were tested in the context of the statement of problems and objectives using Ho and Ha as symbol representing the null and alternative hypothesis respectively  Osoala, (1990)

  • Ho: Liquidity crisis in Nigeria banking sector during 2008 GFC  has no effects on the performance of bank shares traded in NSEM

Ha:   Liquidity crisis in Nigeria banking sector during 2008 GFC has effects on the performance of Bank shares traded in NSEM

  • Ho: Currency  crisis in Nigeria banking sector during 2008 GFC has  no effects on the performance of the banks share traded in NSEM

Ha: Currency crisis in Nigeria banking sector during 2008 GFC has effects on the performance of the bank shares traded in NSEM

  • Ho The fluctuations of  banks Shares Prices during 2008 GFC has no effects on the performance of the  bank shares traded in  NSEM

Ha:  The fluctuations of banks shares prices during 2008 GFC has effects on performance of  banks Shares Prices traded in NSEM

  • Ho: Risk taken in business with   banks during 2008 GFC  has no effects on performance of  banks shares traded in NSEM

Ha: Risk taken in business with banks during 2008 GFC has effects on performance of banks shares traded in NSEM

  • Ho: There is no relationship between price of banks shares before and after the 2008

GFC traded in NSEM

Ha: there is relationship between price of banks shares before and after the 2008 GFC traded in NSEM

 

1.5 Significance of the study

The research is significant to both financial and non financial institutions at national and   international level as the crisis touches an every aspects of human life. For example multinational companies that operate directly or indirectly across the globe will realise the negative effects coursed by the crisis  and guard against it in future by diversifying their resource portfolio and respecting  of ethics  and professionalism to reduce or mitigate against the a complete loss in the event of future occurrence. Again, the lesson leaned from the crisis will open eyes of the management of multinational and national firms to develop a policy and strategy to reduce the effects and put in place controls in business operations for sustainability present and the future purposes.

 

In the case of government, this research will be significant to government policy makers as well as implementers such as Ministries of Finance, Budget and economic planning,

Commerce and Trade and other government agencies like Central Bank, Security and Exchange Commission, Deposit Insurance companies state securities and investment companies and others to revisit there existing policies with a view to reconstructing or updating  some, so as to managed the present day challenges of any event of this nature.

 

For investors, the research will add to their knowledge about the nature and the possible modalities they can undertake in the event of such situations as well as help them appreciate the concept of portfolio management of assets rather than putting all their eggs in one basket. There is also possibility for more research in to global financial crisis as a result of this research.

 

The financial institutions in Nigeria including banks on which this study was built will benefit greatly by understanding the practical consequences of the crisis and develop guide lines strict moderate operations,  in particular the legal frame work related to lending to avoid lapse in to crisis situations. Researches proves that poor lending management is one of the major factors that brought about financial the crisis. Similarly non financial sectors will also benefit from the research by understanding the causes of such crisis and role that all can play in avoiding them. They will no longer be in the darkness about such issues.

 

1.6 Scope of the study

The research work concentrated in Abuja and Lagos which are the present and former country capitals respectively, where all the banks Head offices are located. The study data covered five (5) years period beginning from January, 2006 to December 2010.  Two (2) years (2006 and 2007) are considered as the period before the event and 2007, 2008 as a window period while 2009 and 2010 as period after the event. This period is enough to used panel data during the analysis which gives room for the applications of two sample t- test of comparison. The reasons for using five (5) years as a scope was to determine the changes that occurred in banks stocks prices.

 

1.7 Limitations of the study

The study is limited to the performance of banks stocks that are traded in stock exchange market of Nigeria. The measures of performance are further restricted to liquidity, currency, fluctuation of banks shares prices and risk taken in business with banks. Again those measurements are further broken in to small units which formed the bases of the supportive variables. However the used of the term performance of bank in this research is restricted to those variables but it does not mean those are the only scale of measuring performance there are others like capital strength, assets strength, branch network, level of technology and host of other which are not fully exploit.

 

Another limitation is that since the methodology of the analysis is modified event study, limited data was used to avoid interferences from other events. While in the other hand the researcher also experienced a lot of challenges in obtaining relevant data information for long period of time which forced the research model to be modify from ordinary event study which concerned about cumulative average returns of normal and abnormal to modify event study that capture the average cumulative returns of means and variances‟ before and after the crisis period. Similarly during data collection the researcher faced difficulties from the target populations which included serious investigations on the purpose of the research. These investigations were carried out by the respective authorities including Nigeria Stock Exchange, security and exchange commission, Central Bank of Nigeria and the respective money deposit banks that the  study focus as on. According to them such investigation is a legal procedure requirement before approval of the research so that ethical values of the professions are respected in additions to the current securities challenges and market competitions.

 

The personality of the researcher was also investigated caution from his employer and two of his supervisors, just to re confirmed the sources and bases of the research. In addition there were also not time and financial constraints, which slowed the rate of the data collection and indeed the whole work as the researcher does not reside in any of the cities where the data was collected therefore adequate arrangement had to be made for accommodation within the period of the data collections. This proved to be expensive coupled with the insecurity of the nation as at the moment. Not only that in almost all the banks visited  responsible for the  provision of  information‟s were also same officers handling other sensitive responsibilities within the bank which demand no compromised for individual benefits against the over roll organisational benefits since profit maximisation and customers satisfactions are   the key focus of all  modern bank‟s .

 

1.8 Organization of the study

This study is organized in five (5) chapters. The foregoing chapter introduced the study background, statement of problem general and specific objectives, hypothesis, significant of the study scope, limitations of the study and organization of the study. Chapter two reviewed the relevant literatures which coverers theoretical, and concept framework of the global financial crisis, evolutionary trend of the global financial crisis, effects of the crisis to the world economy and Nigeria banking sector before and after the pronouncement of the 2008 GFC four (4) theoretical models  were  discussed models  but one (1) anchors the research. Empirical literatures were also discussed and a conceptual frame was presented to depict the research in a diagrammatical form. Chapter three highlights the study design, target populations, data sources, data collection instrument, data collection procedure, testing of validity and reliability of the instrument, the operationalization of the variables, modelling and analysis procedure and testing of the hypothesis. Chapter Four present results and discussion of the results and finally chapter Five cover the study summary, conclusion, policy recommendations and suggestions on areas of further research.

 

1.9 Research ethical procedure and consideration

Ethical procedure consideration  seems to be new concept in theory of research, but old concept in research application which differed from one place to another due to differences of legal framework that guide the application of the ethical procedures. This procedure served as guidance to the researcher before during and even after the research.

It helped provide a check and balances to the integrity of the researcher as well as the institutions in which the research was carry out in case of human error or misconceptions as well as ensuring proper channels were   followed according to the law

 

A research of this nature required an introductory letter from a supervisor or the Postgraduate school on behalf of the institution which introduced the researcher to the organizations the letter was signed and stamped by a higher officer of the institution contained all the details of the researcher and the topic of his research. It was addressed specifically to the target audience. In some instances the photograph of the researcher is attached on the letter with signature and stamp across the photograph.  Another letter was  required  from Ministry of Science and Technology Kenya as well as a  is a good letter of Testimonial character if the research is financially, security or any nature that is so complicated in  Nigeria; through  email telephone or fax the legality and authenticity of the letters as well as the need for the research were verified.

 

 

 

EFFECTS OF 2008 GLOBAL FINANCIAL CRISIS ON THE PERFORMANCE OF BANKS SHARES TRADED IN STOCK EXCHANGE MARKET IN NIGERIA.

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