DETERMINANTS OF FINANCIAL DISTRESS IN THE CASE OF MANUFACTURING COMPANY IN ADDIS ABABA-ETHIOPIA

Abstract

The main objective of this study was to investigate the determining factors of financial distress in manufacturing share company Addis Ababa-Ethiopia by using panel data of 10 manufacturing share company from 2011 to 2020. To accomplish the study objective explanatory research design was employed, and quantitative research approach was used. Secondary data was used to achieve the intended objective of the study. Descriptive and inferential statistics were used to analyze the collected Data. The study found that firm leverage, liquidity, profitability, and firm size from firm specific variables and inflation from macro-economic factor are statistically significant determinant variables, on debt service coverage as a proxy of financial distress, but solvability and effeicncy from firm specific and economic growth and exchange rate from macro-economic factor are statistically insignificant determinants variables on debt service coverage as proxy of financial distress of manufacturing company in Addis Ababa-Ethiopia during the study period. The study recommended that manufacturing share company should follow optimal capital structure with restructuring and retrenchment. The study also suggests manufacturing share company should revise their policy capital structure financing and strategy by considering the potential threat and opportunities in order to get competitive advantage.