Assets Composition and Firm Stability: A Panel Study
DOI:
https://doi.org/10.51699/cajitmf.v7i2.1258Keywords:
Asset Composition, Corporate Stability, Bankruptcy, Hausman TestAbstract
This study examines the impact of asset structure on financial stability of manufacturing firms in Nigeria. Panel data set covering the period from 2011-2021were collected from a sample of 37 manufacturing firms listed on the Nigeria Exchange Group. The interest variables include Altman Z score (a proxy for corporate financial stability), while Property, Plants and Equipment, Current asset, Intangible assets and financial asset were the proxies for Assets Structure. After the necessary pre-estimation test to ensure that the estimated model output was robust and valid for policy purposes, the Hausman test was further applied to enhance precision in selecting either the fixed effect or random effect. Based on the Hausman test, fixed effect regression output was found to be most appropriate hence, the fixed effect regression results for the two models was adopted. Accordingly, the first model equation revealed that Current asset (CAST) and Leverage (LVG) impacted significantly on Corporate stability (COPS) of manufacturing firms in Nigeria while Financial Assets (FAST) and Intangible Assets (INTA) had no significant impact on corporate stability of same firms. Furthermore, the result of equation (2) revealed that Property, Plant and Equipment (PPE) and leverage (LVG) impacted significantly on Corporate Stability of manufacturing firms. While LVG improved COPS, PPE deteriorated COPS. In conclusion the manufacturing firms in Nigeria are in the gray area-tilting to financial distress, as revealed by the average Altman z score of 1.3. However, these firms can rebuild/strategize by increasing Corporate financial stability and prevent bankruptcy through increasing their Current Assets and reducing leverage. Thus, the current study has unraveled the influence of assets structure (composition) on corporate stability of manufacturing firms in Nigeria.
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