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The aim of this paper is to identify the major determinants of bank asset quality in an era of regulation‐induced industry consolidation, using the Nigerian case to demonstrate how consolidation can heighten incidences of non‐performing credits in a fragile banking environment.

The paper makes use of panel data from 19 out of a total of 25 banks operating in Nigeria. A multivariate constant coefficient regression model is adopted as the estimation technique. The dependent variable in the model is quality of bank assets, proxied as the proportion of non‐performing loans (NPL) to total loans; while operating efficiency, profitability, asset liquidity, loans to deposits ratio, predictability of depositors' behaviour, size of bank capital, and board skill constitute the exogenous variables.

The study reveals that deterioration in asset quality and increased credit crisis in the Nigerian banking industry between the periods 2004 and 2008 were exacerbated by the inability of banks to optimally use their huge asset capacity to enhance their earnings profiles. It shows that excess liquidity syndrome and relatively huge capital bases fueled reckless lending by banks; and that increase in the level of unsecured credits in banks' portfolios ironically helped to mitigate the level of NPL within the studied period.

The findings here should be interpreted with caution. The reason is because of the relatively fewer number of observations and the likely biases associated with the use of pooled regression approach.

This paper is one of the first to investigate the specific impact of banking consolidation on the quality of bank assets in an underdeveloped financial system. Among such countries facing such challenge, the Nigerian case is unique considering that the 2004/2005 banking consolidation in the country was recorded as the largest in the history of banking in Africa. The findings here make clearer the policy/practical implications of using regulation‐induced consolidation to pursue the goal of increased credit flows in a less developed financial system.

The purpose of this paper is to investigate, from an undeveloped market perspective, the nature and significance of firm size as a determinant of corporate financial leverage.

A panel data fixed‐effects regression model is used to estimate the relationship between financial leverage and firm size, while controlling also for the effects of other acclaimed determinants like asset tangibility, profitability and firm age. The dataset used covers 71 firms quoted in the Nigerian stock markets over a 17‐year period (1990‐2006).

The study reveals that as much as 91.4 percent of the total finances of Nigerian‐quoted firms is of short‐term liabilities, with just 8.6 percent constituting long‐term liabilities. It finds that firm size is negatively and significantly related to financial leverage. Controlling for some other determinants, the arising results tend to confirm an over‐bearing influence of the pecking order theory in the financing patterns of Nigerian‐quoted firms – by revealing that the relationship between profitability and financial leverage is highly significant and negative; and that firm‐age is positively and significantly related to financial leverage.

Using data from a country with undeveloped and inefficient financial markets, this paper provides an important insight on the international debate on the effects of size on corporate decisions.

The purpose of this paper is to examine whether industry‐specific factors play a more significant role in the financing decisions of firms than firm‐specific characteristics; and to determine the degree of uniformity that exists between a firm's capital structure and industry financing patterns in Nigeria.

The described study makes use of fixed effects panel regression techniques. The dataset, which covers the period 1990‐2006, comes from a sample of 71 non‐financial firms quoted in the Nigerian Stock Exchange.

The study finds support for both the pecking order theory and the trade‐off theory of capital structure in Nigeria. Firms/industries that are more profitable have less proportion of debt, and those that have a higher level of asset tangibility use more long‐term finances. Empirically, the study reveals that the set of factors that explain firm‐specific determinants of capital structure do not statistically and significantly explain the way industries follow finance.

The study affirms the need for firms to invest reasonable resources in setting up capital structure policies, rather than herd along industry patterns.

Though studies on industry herding and financial leverage are not new, the paper gives interesting insights into the nature of the relationship in an atmosphere of shortage of capital supply and poor corporate performance.

The primary aim of this paper is to investigate the nature, degree and direction of the effects of certain classes of corporate ownership on capital structure decisions among firms.

Using a sample of 71 quoted companies in Nigeria, the study adopts panel fixed effects regression models to estimate the relationship between financial leverage and corporate ownership, while controlling for some firm‐specific characteristics like profitability, firm size and firm age.

The study finds that discrimination between indigenous and foreign firms is a major determinant of financial leverage in Nigeria; and that the consistency of empirical results and capital structure theories across countries depends much on the dominant nature of corporate ownership structure.

An attempt to widely generalize the results of this study may be challenged by its relatively small sample. With data from just a sample of 71 firms, the robustness of the country‐, time‐ and company‐ effects may not have been fully captured in the estimation process.

The paper provides necessary platforms, especially to corporate managers, for aligning financing decisions and ownership structure to other structural characteristics such as size, age, and profitability.

The study is unique because it examines ownership effects on leverage using selected ownership classes; and because it focuses on an economy with harsh corporate operating environment and constrained capital market condition..

The purpose of this paper is to establish whether inefficiency in a tax system and the likely difficulty in resolving tax matters can reduce the appeal for tax shield as incentive for debt financing, and by so doing exacerbate the cases of tax fraud.

A review approach/theoretical approach is adopted in the paper, where, in addition to reviewing literature on the relationship between tax incentives and corporate financing, the paper examines the structure of the Nigerian tax system, the gaps, and some pending tax cases involving foreign firms in Nigeria. Based on some theoretical judgments, efforts were made to link the rising cases of tax frauds to the dwindling appeal for tax shield as an incentive for the use of debt.

The study reveals that, as in the case of Nigeria, an environment of multiple tax system reduces incentives to pay tax or for voluntary compliance; that the exclusion of crucial non‐debt tax shelters such as depreciation, heightens pressure on the use of debt‐based tax shelters; and that controversies on deductibility make it difficult to distinguish between criminal and civil proceedings in tax cases.

The paper is only theoretical. The number of cases captured is very limited. However, the issue of tax frauds among corporate entities in the country remains very popular.

The paper is the first to examine the likelihood of an inefficient tax environment to reduce the appeal of tax shield as an incentive to debt financing.