Business Administration and Business Economics

Abstract

Nigeria banks faced financial crisis due to financial meltdown and government treasury
single account policy. This has forced banks to employed strategic cost management techniques like
downsizing of employee and reduction of staff salary to survive and sustain their competitiveness in
banking industry. This study examines the influence of downsizing of staff and reduction of staff
salary on bank profitability. The specific objective is to ascertain the influence of downsizing of
employee and reduction of staff salary on return on asset. Survey design was used for the study.
Purposive sampling technique was used to select the sample frame from first generation of banks that
are licensed with international authorization in Nigeria This study obtained secondary data from the
Nigerian Stock Exchange Fact-book and Annual Report and Accounts of the sample population for
the period 2006 to 2016. A linear regression analysis was used in estimating the parameter of the
model. The study finds out that there is negative relationship between downsizing of employee,
reduction of staff salary and profitability. It was discovered that the period after banks downsize their
employee, bank performance was at its low ebb. We strongly recommend that banks can reduce their
employee salary instead of laying them off. Then, salary increment can be done when the financial
performance is improving.