Journal of
Accounting and Taxation

  • Abbreviation: J. Account. Taxation
  • Language: English
  • ISSN: 2141-6664
  • DOI: 10.5897/JAT
  • Start Year: 2009
  • Published Articles: 115

Full Length Research Paper

Capital structure and corporate financial distress of manufacturing firms in Nigeria

Ikpesu Fredrick
  • Ikpesu Fredrick
  • Department of Accounting, School of Management and Social Science, Pan-Atlantic University, Lagos, Nigeria.
  • Google Scholar
Eboiyehi Osazemen C.
  • Eboiyehi Osazemen C.
  • Department of Banking and Finance, Faculty of Management Science, University of Benin, Edo State, Nigeria.
  • Google Scholar

  •  Received: 08 August 2018
  •  Accepted: 29 August 2018
  •  Published: 30 September 2018


This paper investigated the effect of capital structure on corporate financial distress of manufacturing firms in Nigeria by employing panel corrected standard error (PCSE) technique. The variables used in the study are corporate financial distress, capital structure, firm size, assets tangibility, revenue growth, profitability and age of firms. The outcome of the research reveals that capital structure affects corporate financial distress negatively while company age from listing years, profitability and asset tangibility affects corporate financial distress positively. The result further revealed that firm growth and firm size affects financial distress negatively. Policy implication from the study is that managers have to be cautious when designing their capital structure. Also, government should encourage firms to use internally generated fund than external fund by granting preferential tax treatment on their retained earnings. This will encourage investment in growth-oriented strategies.  In addition, the Central Bank of Nigeria should direct banks to lower the cost of borrowing for manufacturing firms to ensure financial stability.


Key words: Corporate financial distress, capital structure, PCSE, Nigeria.