Universal Journal of Accounting and Finance Vol. 10(2), pp. 433 - 443
DOI: 10.13189/ujaf.2022.100207
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Predicting Financial Distress and Corporate Failure: Empirical Evidence from the Nigerian Banking Sector

Nkiri J. E. ^*, Ofoegbu G. N.
Department of Accountancy, University of Nigeria, Nsukka, Nigeria

ABSTRACT

This study examines the relevance of accounting based models in the prediction of financial distress and corporate failure. Using a sample of 30 commercial banks, consisting of 15 failed and 15 non failed banks during the period 2006-2020, the study utilizes the Logit and Multiple Discriminant Analysis (MDA) models using accounting information to predict the likelihood of failure within the Nigerian banking sector. The empirical results reveal that bank characteristics derived from financial statements can be used to predict corporate failure. Specifically, bank liquidity and profitability are key determinants of bank failure. The study adds to the scare body of literature on bank failure among developing economies, by analyzing, developing and testing a prediction model in a developing economy like Nigeria. This study also offers recommendations for both policy and practice, especially for bank regulators and the management team on the need to monitor the profitability and liquidity position of banks.

KEYWORDS
Corporate Failure, Financial Distress, Bank Failure, Failure Prediction

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] Nkiri J. E. , Ofoegbu G. N. , "Predicting Financial Distress and Corporate Failure: Empirical Evidence from the Nigerian Banking Sector," Universal Journal of Accounting and Finance, Vol. 10, No. 2, pp. 433 - 443, 2022. DOI: 10.13189/ujaf.2022.100207.

(b). APA Format:
Nkiri J. E. , Ofoegbu G. N. (2022). Predicting Financial Distress and Corporate Failure: Empirical Evidence from the Nigerian Banking Sector. Universal Journal of Accounting and Finance, 10(2), 433 - 443. DOI: 10.13189/ujaf.2022.100207.