Regulatory non-compliance and performance of deposit money banks in Nigeria

Purpose - The purpose of this study is to examine regulatory sanctions from an emerging economy perspective and analyzing the impact of regulators imposed monetary sanctions on banks' performance. Design/methodology/approach - The study adopted correlational research design to examine the effect of regulatory penalties on the performance of deposit money banks in Nigeria. This study used panel data from a sample of 15 deposit money banks in Nigeria for the period of 2006-2015. Multiple regression analysis was carried out. Findings - Results showed that penalties imposed by regulators in the Nigerian banking industry have no significant impact on the bottom line of the defaulters. Penalties imposed on foreign exchange and international trade related infraction showed that the cost of penalties is below the benefits enjoyed from such infractions. Practical implications - The insignificant impact of penalties on performance implies that deposit money banks have considered penalties imposed by regulators as operational expenses and transferred such to customers. Originality/value - The study differs from other studies that examined regulatory penalties on performance by focusing on financial performance and using data from an emerging economy perceived to have weak regulatory environment.