Capital structure and corporate financial distress of manufacturing firms in Nigeria

Ikpesu, Fredrick; Osazemen, C Eboiyehi

doi:10.5897/jat2018.0309

Cited by 32 publications

(36 citation statements)

References 22 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Research findings by Tesfamariam (2014) revealed that there is an existence of a positive link between profitability and financial distress. Similar finding was also found by Ikpesu and Eboiyehi (2018) while studies by Thim et al (2011) revealed that profitability negatively affects financial distress. Research work of Baimwera and Murinki (2014) indicates that profitability negatively affects financial distress.…”

Section: Profitabilitysupporting

confidence: 85%

“…In assessing the specific firm determinants of corporate financial distress, the dependent variable employed in the study is the Altman Z score (AMZ) which is used in measuring financial distress. The Altman Z score is used in measuring a firm financial health by predicting the likelihood that a firm will become distress within a 2 year period (Cheluget, 2014;Kristanti, 2015;Kristanti et al, 2016;Eboiyehi and Ikpesu, 2017;Ikpesu and Eboiyehi, 2018). When the z score is greater than 2.9, the firm is in a safe zone, if the z score is between 1.23 and 2.9, is an indication that the firm is in a grey zone but if the z score is below 1.23, the firm is regarded to be in a distress zone.…”

Section: Datamentioning

confidence: 99%

“…Revenue growth REVGR Growth in revenue Thim et al (2011), Ikpesu and Eboiyehi (2018) Share price Market price of share Market price of share Devji and Suprabha (2016), Idrees and Qayyum (2018) becoming financially distress. A continuous fall in the share price of a firm might discourage the prospective investors for investing in such firm.…”

Section: Control Variablementioning

confidence: 99%

“…Several empirical studies have shown that leverage is one of the major influential factors that cause financial distress of firms (Pranowo et al, 2010;Tesfamaria, 2014;Kristanti et al, 2016;Gathecha, 2016). Also, other studies have shown that revenue growth, leverage, share price, liquidity and profitability are the firm specific determinants of corporate financial distress in firms (Becchetti and Sierra, 2003;Ong et al, 2011;Zeli, 2014;Ikpesu and Eboiyehi, 2018).…”

Section: Introductionmentioning

confidence: 98%

See 3 more Smart Citations

Firm specific determinants of financial distress: Empirical evidence from Nigeria

Ikpesu¹

2019

J. Account. Taxation

View full text Add to dashboard Cite

This paper in an attempt in answering the basic research question on what actually determines financial distress of firms in the manufacturing sector in the country employed the fully modified ordinary least square (FMOLS) on annual time series data of eighteen listed manufacturing firms on the Nigeria stock exchange (NSE) which was obtained from their audited financial statement. The endogenous variable used in the study is financial distress which is measured using the Altman Z score while the exogenous variables employed in the study are firm size, liquidity, profitability, and leverage. The study also employed a list of control variables such as revenue growth and share price. Findings from the study showed that leverage, liquidity, profitability, firm size, revenue growth, and share price are the firmspecific determinant of financial distress of firms in the manufacturing sector in the country. The findings of this study pose significant policy directions. First, managers and owners of the corporate organization need to pay critical attention to these variables when making financial decisions. Second, to ensure smooth operation and continued survival of firms, corporate managers need to design policies that will determine the appropriate level of liquidity, leverage, profitability and revenue growth. Also, management needs to set up control measures that will detect early warning signal of financial distress.

show abstract

Section: Profitabilitysupporting

confidence: 85%

Section: Datamentioning

confidence: 99%

Section: Control Variablementioning

confidence: 99%

Section: Introductionmentioning

confidence: 98%

See 2 more Smart Citations

Firm specific determinants of financial distress: Empirical evidence from Nigeria

Ikpesu¹

2019

J. Account. Taxation

View full text Add to dashboard Cite

show abstract

“…The coefficient of the variable x4 is positive and statistically significant (p-value <0.05) indicating that high leveraged firms face financial distress more often than firms with low ratio of total liabilities to total assets. However, Ikpesu and Eboiyehi (2018) argue that the ratio of Long term loans to total assets has negative impact on financial distress. This is because firms that received long term loan are expected to be positively evaluated from their lenders/creditors (institutions or banks).…”

Section: Resultsmentioning

confidence: 99%

Bankruptcy prediction and homogeneity of firm samples: The case of Greece

Nikolaos¹,

Chytis²,

Georgios³

2018

J. Account. Taxation

View full text Add to dashboard Cite

This paper explores the prediction of bankruptcy of Greek retail and wholesale trade companies and, in particular, the relation between the forecasting ability of the Logit model and the degree of homogeneity of the samples of bankrupt and healthy companies. A sample of 119 bankrupt companies was matchedwith an equal sample of healthy companies for the period 2003-2014, based on year, sector, and subsector, which was formed by random selection. Using the method of factor analysis, seven financial ratios were selected, which are the independent variables of the model. Applying the Logit model, the results showed a significant explanatory capability of the model in the trade sector as a whole as well as in the wholesale trade sub-sectors, which increases as the homogeneity of samples of bankrupt and healthy companies increases.In particular, the predictive capability of the model that we used improved by 14.3% regarding the classification of bankrupt firms when the same methodology was applied from the broader sector to the sub-sector. Moreover, the independent variable of capital structure has the highest stability and contributes substantially to the discriminant validity of the Logit model.

show abstract

An assessment of the effect of partisan ideology on shale gas production and the implications for environmental regulations

Zheng

Zhang

et al. 2021

Economic Systems

View full text Add to dashboard Cite

Capital structure and corporate financial distress of manufacturing firms in Nigeria

Cited by 32 publications

References 22 publications

Firm specific determinants of financial distress: Empirical evidence from Nigeria

Firm specific determinants of financial distress: Empirical evidence from Nigeria

Bankruptcy prediction and homogeneity of firm samples: The case of Greece

An assessment of the effect of partisan ideology on shale gas production and the implications for environmental regulations

Contact Info

Product

Resources

About