THE RELATIONSHIP AND EFFECT OF CAPITAL STRUCTUREONFINANCIAL DISTRESS OF PUBLIC QUOTED NON-FINANCIAL FIRMS IN NIGERIA

Abstract

This paper focuses on capital structure and its relationship and ef ect on distress of
public quoted non-financial firms in Nigeria. The study's major objective is to explorethe ef ect of capital structure on the financial distress of publicly quoted non-financial
firms on the Nigeria Exchange (NGX). Independent variables, financial leverage(debt to assets), short-term debt to equity, and long-term debt to equity, wereconsidered to represent the capital structure. The Altman Z-score was usedtomeasure financial distress. The assumptions of trade-of theory, pecking order theory, and agency theory guided this study. The study adopted an ex post facto researchdesign. Secondary data from the financial statements of publicly quoted non-financial
firms in Nigeria from 2011 to 2021 were used. A fixed-ef ects regression analysis
technique has been employed to help answer the hypotheses. The study discoveredthat converting short-term debt to equity has an insignificant positive ef ect onfinancial distress. In contrast, long-term debt to equity has an insignificant negativeef ect on the financial distress of publicly quoted non-financial firms in Nigeria. As aresult, this study recommends considering other factors such as the operatingenvironment not included in the analysis, which could also influence financial distress. It also recommended that businesses should promote prudent financial management.