What attributes cause some companies to have more than one Banker concurrently, knowing that it may not be economical in the long run?
A Lecturer in the department of Accounting and Finance, Faculty of Management Sciences, Federal University Otuoke, Dr Etumudon Ndidi Asien, sought to answer this question through his paper presentation at the 6th African Accounting and Finance Conference (AAFA 2016) held in Nairobi Kenya from 30th August – 3rd September 2016.
The paper titled “firm-level determinants of number of bankers by listed Nigerian firms,” underscored by the theory of financial economics was concerned with costs of maintaining banking relationships including COT and other maintenance service charges.
Dr. Asien having carried out his hypothesis from samples from 38 non-financial firms listed on the Nigerian stock exchange and collation of data from online annual reports and financial statements of these companies within 2011-2013, gathered that there is a significant positive relationship between the number of bankers and firm attributes characterized by cash flow from operating activities, profit after tax, firm size and firm age.
This means that when a company has good cash flow from operating activities, makes good profit after tax and expands, it is likely to have multiple bankers and where there was no significant relationship between age of firm and number of bankers, there was no relationship between sales revenue and number of bankers.
Based on his findings, he concluded that “the more a company makes profit after tax, the more cash flow and likelihood to expand which may result in the need to have multiple bankers.
Dr. Etimudon Ndidi Asien therefore recommended that due to the cost implication of servicing accounts, companies should be mindful of the number of bankers because the more bankers, the more maintenance costs.