Empirical Review of Implications of Financial Leverage on Performance of Quoted Oil and Gas Companies in Nigeria

Abstract

This study was conducted to examine the implication of financial leverage on performance of quoted oil and gas companies in Nigeria. This is premeditated on the fact that debt capital is usually acquired by firm to finance assets with the expectation the returns from such investments will exceed the costs of the debt capital used. Often, this is always not the case either because of inappropriate management strategies or other reasons. Ex-post-facto research design was adopted involving use of panel secondary data as published by eight(8) oil and gas companies selected from the population of twelve(12) firms quoted on the floor of the Nigerian Stock Exchange (NSE) for the period 2006-2020. Descriptive and multiple linear regression statistics were used to analyze data collected. The dependent variable was return on Assets (ROA), proxy for financial performance and independent variables being financial leverage decomposed into Debt Ratio (DR), Debt-to-Equity Ratio (DER), Long-term Debt Ratio (LTDR) and Cost of Debt (COD,) Results Shows DR, LTDR and COD had negative and significant implications on ROA, while DER also had negative but insignificant implications on ROA of quoted oil and gas firms in Nigeria. Hence, it was concluded that during the period of the study, leverage had negative and significant implications on financial performance of oil and gas firm in Nigeria. It was recommended that oil and gas firm should minimize debt capital usage in their financial structure to shore-up returns.

Corporate Attributes and Risk Management Disclosure of Listed Insurance Companies in Nigeria

“…This could be because when firms are more profitable, they have greater resources to invest in systems, processes, and controls that can improve the quality of their risk management and disclosure practices. The outcome of this finding was supported by the works of Okpala et al (2021) and Etim et al, (2023) who observed a positive relationship between profitability and risk management disclosure.…”

“…And market risk disclosure has a significant positive effect on earnings multiple of listed construction/real estate firms in Nigeria. Etim et al, (2023) examined the relationship between the firm's characteristics and asset growth. Ex post facto sourcing of data was conducted from the annual financial reports of relevant companies on the Nigerian Stock Exchange from 2008 to 2019 fiscal years.…”

“…The empirical literature shows that there has been growing number of studies in this area but some gaps were identified. It was observed that some of the studies on corporate attributes focused on other performance parameters such as assets growth (Etim et al, 2023); market uncertainty (Handoyo et al, 2023); Financial performance (Akpan & Akai, 2022;Akenroye et al, 2022;Ifurueze & Ofor, 2021;Ali et al, 2020); capital structure (Mbonu & Amahalu, 2021;Gharaibeh & Khaled (2020) and firms value (Jihadi et al, 2021). Worst still even the study that used risk management practices focused on other sector of the economy other than the insurance firms (Ekwueme, 2022).…”