Corporate Restructuring and the Financial Stability of Quoted Deposit Money Banks in Nigeria

Abstract

Abstract

This study examined the effect of corporate restructuring on the financial stability of quoted deposit money banks (DMBs) in Nigeria. Specifically, it evaluated the effects of financial restructuring, asset restructuring, operational restructuring, and capital restructuring on bank stability. The study adopted an ex post facto research design and used balanced panel data for eight quoted DMBs over the 2010–2023 period, yielding 112 bank-year observations. Data were obtained from audited annual reports. Financial stability was measured using the bank Z-score, for which a higher value indicates a lower probability of insolvency and greater financial stability. The explanatory variables were measured using the restructuring proxies reported in the banks’ financial statements. Panel estimation was conducted using the random-effects model, selected on the basis of the Hausman and Breusch–Pagan LM tests. The results showed that financial restructuring had a significant negative effect on financial stability (β = −0.071595, p = 0.0106), asset restructuring had a significant positive effect (β = 0.420337, p < 0.001), operational restructuring had a positive but statistically insignificant effect (β = 0.009859, p = 0.9429), while capital restructuring had a significant positive effect (β = 0.171277, p = 0.0001). The study concludes that asset and capital restructuring are important correlates of bank financial stability, whereas the operational restructuring proxy did not exhibit a statistically significant independent effect during the study period. The findings have implications for bank management and regulators seeking to strengthen resilience through asset-quality improvement and sustainable capital restructuring.