Capital Structure and Probability of Bankruptcy: Evidence from Listed Deposit Money Banks in Nigeria

AFRAG007

Capital Structure and Probability of Bankruptcy: Evidence from Listed Deposit Money Banks in Nigeria

Ishaq Alhaji Samaila PhD, FCA, ACS Department of Accounting

Bayero University Kano, Nigeria ishaqismail005@yahoo.com

Ali Abdulhamid Badejo

School of Business Studies, Department of Accounting,

College of Administration, Management and Technology, Potiskum, Yobe State Nigeria

alibadejo@gmail.com

Usman Muhammad Adam Department of Accounting and Finance,

Faculty of Management and Social Sciences,

Federal University Gusau, Zamfara State Nigeria               adamusmanmuhammad@gmail.com

Abstract

This study examines the impact of Capital Structure on the Probability of Bankruptcy of listed Nigeria Deposit Money Banks

(DMBs) for the period of ten (10) years, from 2010 to 2019. Descriptive research design was adopted for this study. The population of the study is made up of the fourteen (14) Deposit Money Banks (DMBs) listed on the Nigeria Stock Exchange  (NSE)  as  at  2020  and thirteen

(13) (DMBs) was used as sampled. The secondary data was derived from annual reports of (DMBs). Panel regression was used to analyze the data collected for the study, the study showed that banks in Nigeria are at distress zone, and a significant positive impact between Capital Structure and Bankruptcy of listed (DMBs), Bank Size and Assets Tangibility revealed positive and insignificant impact on the Bankruptcy of listed (DMBs) and Profitability and Bank Age have negative and significant impact on the Bankruptcy of a Bank. The study concludes that Capital Structure, Profitability and Bank Age have impact on the Bankruptcy while Bank Size and Assets Tangibility have no impact on the Bankruptcy of Banks. The study recommends that banks in Nigeria should be cautious in designing their capital structure. Government should encourage banks to use internally generated fund than externally generated fund. Also, the Central Bank of Nigeria should provide an enabling environment for low cost of borrowing for banks    in    Nigeria    to    ensure financial stability, this will encourage investment in growth-oriented strategies.

Keywords: Capital Structure, Probability of Bankruptcy.

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