Citation:

ADEWOLE, Ezekiel Aremu FCA, ACIT, FIIP, PhD Student., Prof. KEHINDE .S. James, PhD, FCA, FIIP., ADEBAYO M. Adeniyi, PhD, FCA. "Effects of Firm-Specific Factors in Predicting Financial Distress of Listed Consumer Goods Manufacturing Companies in Nigeria" International Research Journal of Economics and Management Studies, Vol. 3, No. 10, pp. 27-36, 2024.

Abstract:

The effects of the firm’s specific factors in predicting the corporate financial distress of Nigerian listed consumer goods manufacturing firms were examined in this study. This study’s precise goals were to look into the relationship between the effects of specific factors in predicting financial distress in Nigerian listed consumer goods manufacturing firms. The firm specific factors adopted are profitability, efficiency ratio, working capital, operating cash flows, firm size and operating capacity. A cross-sectional time series of secondary data encompassing one hundred and fifty observations (2013–2022) was taken from the audited financial statements of fifteen frugal consumer goods manufacturing firms listed on the Nigerian Exchange Group. Ex post facto research methodology was adopted, and Panel regression (Short Panel Regression Model) was used to analyze the data. Regression results showed that profitability, working capital and firm size have a positive and significant impact on corporate financial distress. In contrast, operating capacity, operating cash flows and efficiency ratio have a negative and insignificant impact on financial distress. The study’s basic conclusion, based on the data, was that corporate managers should carefully consider long-term profitability, determining and maintaining the right level of working capital to ensure the firm’s smooth operation. The study recommends that potential creditors and investors should be interested in ratios such as profitability, working capital and firm size, which significantly affect financial distress.

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Keywords:

Financial Distress, Profitability, Efficiency Ratio, Working Capital, Firm Size, Operating Capacity.