Financial Intermediation and Stock Prices of Deposit Money Banks (DMBS) in Nigeria: a Panel Cointegration Approach

Considerable attention in finance literature had focused on the effect of financial intermediation on the economy and its determinants in different financial arrangements. This study examined the influence of financial intermediation on stock prices of Deposit Money Banks (DMBs) in Nigeria using data collected from all the quoted DMBs in the Nigeria between 2009 and 2016. The Panel Fully Modified Ordinary Least Square (FMOLS) regression techniques were adopted and the result shows that changes in variables such as deposits, loans, capital and management will result into an increase in the stock prices in the long run while a similar change in leverage, will result into a decrease in the stock prices. The study concluded that financial intermediation enhances the stock prices of DMBs in Nigeria. Therefore, it is recommended that investors should consider deposits, loans and capital base in their stock selection and portfolio construction involving DMBs' stocks in Nigeria.