FINANCIAL LEVERAGE AND FINANCIAL PERFORMANCE OF OIL AND GAS COMPANIES IN NIGERIA

Open Journal of Management Science

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Field Value
 
Title FINANCIAL LEVERAGE AND FINANCIAL PERFORMANCE OF OIL AND GAS COMPANIES IN NIGERIA
 
Subject financial leverage
financial performance
Nigeria
oil & gas
random effects model
return on equity
 
Description This study was carried out to determine the effect of financial leverage on the financial performance, using secondary data obtained from the annual reports of 7 quoted Oil and Gas firms in Nigeria, and the Nigerian stock exchange (NSE) daily official lists over the period 2005- 2016. Descriptive statistics such as mean, median, minimum, maximum, standard deviation, coefficient of variation, skewness and kurtosis were used in data presentation, while random effects panel estimator is applied in determining the effect of financial leverage variables as short-term debt ratio (STDR), long-term debt ratio (LTDR) and total-debt equity ratio (TDER) on the financial performance measured by the return on equity (ROE). The regression results from the random effects model (REM), the best panel estimator in this study as revealed by the F-test and the Hausman test for best model selection, indicate that STDR and LTDR have no significant effect on the financial performance, and TDER has a negative significant effect on the financial performance denoted by ROE. The study concludes that higher financial leverage in the capital structure of quoted Oil & Gas firms in Nigeria deteriorates shareholders wealth measured by ROE. The study recommends that firms in the Oil & Gas sector should substitute at least 90 per cent of debt in the capital structure with equity, through bonus issue, right issue and higher proportion of retained earnings in the capital structure.
Abubakar, A. | Department of Business Management, Federal University Dutsin-Ma, Katsina State, Nigeria
 
Publisher Open Journals Nigeria (OJN)
 
Date 2020-03-10
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Identifier https://www.openjournalsnigeria.org.ng/journals/index.php/ojms/article/view/78
 
Source Open Journal of Management Science (ISSN: 2734-2107); Vol. 1 No. 1 (2020): OJMS 2020 First Issue; 28-44
2734-2107
 
Language eng
 
Relation https://www.openjournalsnigeria.org.ng/journals/index.php/ojms/article/view/78/85
 
Rights Copyright (c) 2020 Abubakar
https://creativecommons.org/licenses/by/4.0/
 

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