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
Ali Abdulhamid Badejo
School of Business Studies, Department of Accounting,
College of Administration, Management and Technology, Potiskum, Yobe State Nigeria
Usman Muhammad Adam
Department of Accounting and Finance, Faculty of Management and Social Sciences,
Federal University Gusau, Zamfara State Nigeria

This study is on 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. A 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 of 2020 and
thirteen (13) (DMBs) were used as samples. The data used in the study were secondary data
derived from annual reports of (DMBs). Panel regression was used to analyzed the data collected
for the study, the study showed that banks in Nigeria are in 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 a negative and significant impact on the Bankruptcy of a Bank.
The study concludes that Capital Structure, Profitability, and Bank Age have an impact on
Bankruptcy while Bank Size and Assets Tangibility have no impact on the Bankruptcy of Banks.
The study recommends banks in Nigeria should be cautious in designing their capital structure.
Government should encourage banks to use internally generated funds than externally generated
funds. Also, the central of Nigeria should provide an enabling environment for a 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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