Capital Intensity and Operating Cashflow of Quoted Deposit Money Banks in Nigeria

Abstract

The study investigated how different forms of capital intensity relate to net operating cash flows. It employed the ex post facto design as the research design. Secondary data were obtained from the annual reports of deposit money banks listed on the Nigeria Exchange Group (NSE), covering a twelve-year period from 2013 to 2024. The population of the study comprised all the sixteen (16) deposit money banks listed and actively trading on the Nigerian Exchange Group as 31 st December 2024 Out of the total population, a sample size of 10 banks was purposively determined based on firms with complete and available data for the studied variable.Descriptive, correlation and the Panel Regression Model were employed to analyze the data collected. The Econometric Views (E-views) software was used in computing the desired statistics. The results of the fixed-effects estimations showed consistent and distinct effects of capital intensity on banks net cash flow performance. Accordingly, Property, plant and equipment intensity (PPEI) was positive and statistically significant with net operating cash flows. Intangible assets intensity (INTI) was robustly negative for OCFM indicating that increases in intangible intensity led to weaker cashflows. Long-term investments intensity (LTVI) produced a negative and significant effect on OCFM while deferred tax assets intensity (DFTI) indicated insignificant impact on OCFM. Bank size (BKSZ), on the other hand, was significant in all models, but indicated negative effect on OCFM. It was therefore concluded that capital intensity influenced cash flows of banks significantly. Based on the findings and conclusions made the following policy recommendations are advocated. (i) Prioritize targeted tangible investments as PPEI‘s was consistent positive association with operating cash flows, Secondly, manage intangible investments cautiously, because INTI is linked to lower OCFM of banks. Thirdly, treat long-term investments as strategic, not short-term liquidity substitutes. The fourth recommendation was that banks should interpret DTAs conservatively as balance-sheet enhancers rather than immediate cash strength. Finally, regulators and managers should account for the dual role of size, especially in making strategic capital decisions since size has the potential of reducing net operating cashflows.

Keywords

• Capital intensity
• Operating Cash flows
• Intangibles Intensity
• Deferred Tax Intensity

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