Assessing the Impact of Legal Risk on Performance in Nigerian Deposit Money Banks: A SEM Analysisssing the Impact of Legal Risk on Performance in Nigerian Deposit Money Banks: A SEM Analysis

Abstract

The research examined the influence of legal risk on the performance of selected deposit money banks in Nigeria using (primary) data sourced from bank employees through a well-structured questionnaire. The study used Structural Equation Modelling (SEM), and the hypotheses of the study were tested using Partial Least Square (PLS) technique. The model consisted of four latent variables which are legal risk, environmental risk, institutional risk, and performance. Performance served as the explained variable, legal risk, environment risk, and institutional risk served as the explanatory variables; legal risk is the main explanatory variable, while environmental and institutional risks are the control variables. It was observed that legal risk negatively and significantly influences performance. Similarly, the control variables have a significant effect on performance. Therefore, it is recommended that banks take a precautionary approach in managing legal risk by striving to anticipate and prevent it.