IIARD International Institute of Academic Research and Development

WORLD JOURNAL OF FINANCE AND INVESTMENT RESEARCH (WJFIR )

E-ISSN 2550-7125
P-ISSN 2682-5902
VOL. 8 NO. 1 2024
DOI: https://doi.org/10.56201/wjfir.v8.no1.2024.pg222.243

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Capital Structure Determinants of Zombie Status of Listed Non- Finance Firms in Nigeria

G. I Anyanwu, P. Ihejirika, Fortune Bella Charles

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Abstract

The study investigates capital structure determinants of Zombie firm status by drawing samples from listed non-finance firms in Nigeria from 2012 to 2021. Long term debt to asset and debt to equity ratio are the capital structure proxies employed in this study while the dependent variable of the study is zombie firm status. Furthermore, the study employed the variables of profitability as the control variable. The population of the study consists of all the listed non-finance firms in Nigeria from 2012 to 2021. As of December 2021, we had 109 firms listed on the floor of the Nigerian Exchange Group (NGX) (NGX Factbook, 2021). The sampling technique employed in this study is the filtering sampling technique since firms were included in the sample on certain selection criteria. Logistic regression is employed to test the hypotheses of this study. Based on the findings of the study, we conclude that a 1% increase in long term debt to asset ratio will lead to about 1% insignificant increase in interest coverage ratio and thus decreasing zombie status of the firms during the period under investigation. We also conclude that a 1% increase in debt-to- equity ratio will lead to about 1% significant decrease in interest coverage ratio and thus increasing zombie status of the firms during the period under investigation. The study recommends that where non-financial firms must consider using debt in their capital structure, non-current debt should be prioritized ahead of short-term debt. This recommendation is based on the finding that long term debt reduces the incidence of zombies among non-financial firms.

Capital Structure, Zombie Status, Non-Finance, Firms, Nigeria

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