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Effect of Listing Age on Corporate Financial Leverage of Oil and Gas Firms in Nigeria

Received: 17 August 2016     Accepted: 4 January 2017     Published: 26 January 2017
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Abstract

Examination of the effect of listing age on corporate financial leverage of oil and gas firms in Nigeria is the main objective of this study. The study also considers, for sake of robustness, the trend of movement of the variables, the relationships among the variables, as well as the causality of a variable by the other. This made the study a meta-analysis of the time series data. Simple regression was applied to estimate the effect of listing age on financial leverage of the selected firms. Correlation and Granger Causality Tests were applied to ascertain the relationships and causalities among the model variables. The outcome of the analysis is that firm’s Listing Age has a significant but negative effect on Financial Leverage, which implies that, as an oil firm advances in age, the firms’ need for external financing will tend to reduce. Causality test reveals that at a lagged period of one year, there is no causality running from financial leverage to firm age and vice versa. This implies that financial leverage is not caused by listing age of the oil and gas firm or otherwise. When the relationship between firm age and financial leverage was tested, the test reveals that financial leverage has an insignificant negative relationship with firm age in Nigeria Oil and Gas firms. The sustainability of theses outcomes over a long period of time was also tested using the Johansen Cointegration Test which indicates cointegrating equations which implies that short run effects and relationships are very sustainable, all things remaining the same. Therefore, firms are encouraged to borrow less as they advance in age. In conclusion, therefore, at maturity stage of the firm, external borrowing should be discouraged in preference to other sources of investible funds.

Published in International Journal of Economics, Finance and Management Sciences (Volume 5, Issue 2)
DOI 10.11648/j.ijefm.20170502.12
Page(s) 92-97
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2017. Published by Science Publishing Group

Keywords

Leverage, Oil, Life Cycle, Gas, Age, Regression, Cointegration

References
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[2] Ali, K. A (2013). The Impact Of Financial Leverage On Firm Performance: The case of Non Financial Firms In Kenya, Research project submitted to the University of Nairobi, School of Economics in partial fulfillment for the award of the Degree of Masters of Arts in Economic Policy Management.
[3] Antão, P. & Bonfim, D.( 2012). "The dynamics of capital structure decisions," Working Papers 201206, Banco de Portugal, Economics and Research Department.
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[7] Ezeoha, A & Botha, F. (2011). Firm Age, Collateral Value, and Access to Debt Financing in an Emerging Economy: Evidence from South Africa, Sajems Ns 15 (2012) No 1; 55 – 71. Granger, CWJ 1988, ‘Some recent developments in a concept of causality’, Journal of Econometrics. 39 (1/2), 161–194.
[8] Granger, CWJ (1988). Some recent developments in a concept of causality. Journal of Econometrics.39(1/2), 161–194. Kraus, A & Litzenberger, R 1973. A state-preference model of optimal financial leverage. Journal of Finance. 28 (4), 911–922.
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[13] Maina, L & Kondongo, O. (2013). Capital Structure and Financial performance in Kenya: Evidence from Firms Listed at the Nairobi Securities Exchange. Paper presented at the Jomo Kenyatta University of Science and Technology, SHRD Research Conference, Kenya, pp 238-246.
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[16] Rajan, R. & Zingales, L. (1995), What Do We Know about Capital Structure – Some Evidence from International Data, Journal of Finance 50 (5), 1421-1460.
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[18] Robb A. & Robinson, D. T. (2009), The capital structure decision of new firms [Online] Available: http://papers.ssrn.com/so13/papers.cfm?abstract-id=1345895 [Accessed: 17 October 2009].
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Cite This Article
  • APA Style

    Inyiama Oliver Ikechukwu, Ubesie Madubuko Cyril. (2017). Effect of Listing Age on Corporate Financial Leverage of Oil and Gas Firms in Nigeria. International Journal of Economics, Finance and Management Sciences, 5(2), 92-97. https://doi.org/10.11648/j.ijefm.20170502.12

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    ACS Style

    Inyiama Oliver Ikechukwu; Ubesie Madubuko Cyril. Effect of Listing Age on Corporate Financial Leverage of Oil and Gas Firms in Nigeria. Int. J. Econ. Finance Manag. Sci. 2017, 5(2), 92-97. doi: 10.11648/j.ijefm.20170502.12

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    AMA Style

    Inyiama Oliver Ikechukwu, Ubesie Madubuko Cyril. Effect of Listing Age on Corporate Financial Leverage of Oil and Gas Firms in Nigeria. Int J Econ Finance Manag Sci. 2017;5(2):92-97. doi: 10.11648/j.ijefm.20170502.12

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  • @article{10.11648/j.ijefm.20170502.12,
      author = {Inyiama Oliver Ikechukwu and Ubesie Madubuko Cyril},
      title = {Effect of Listing Age on Corporate Financial Leverage of Oil and Gas Firms in Nigeria},
      journal = {International Journal of Economics, Finance and Management Sciences},
      volume = {5},
      number = {2},
      pages = {92-97},
      doi = {10.11648/j.ijefm.20170502.12},
      url = {https://doi.org/10.11648/j.ijefm.20170502.12},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20170502.12},
      abstract = {Examination of the effect of listing age on corporate financial leverage of oil and gas firms in Nigeria is the main objective of this study. The study also considers, for sake of robustness, the trend of movement of the variables, the relationships among the variables, as well as the causality of a variable by the other. This made the study a meta-analysis of the time series data. Simple regression was applied to estimate the effect of listing age on financial leverage of the selected firms. Correlation and Granger Causality Tests were applied to ascertain the relationships and causalities among the model variables. The outcome of the analysis is that firm’s Listing Age has a significant but negative effect on Financial Leverage, which implies that, as an oil firm advances in age, the firms’ need for external financing will tend to reduce. Causality test reveals that at a lagged period of one year, there is no causality running from financial leverage to firm age and vice versa. This implies that financial leverage is not caused by listing age of the oil and gas firm or otherwise. When the relationship between firm age and financial leverage was tested, the test reveals that financial leverage has an insignificant negative relationship with firm age in Nigeria Oil and Gas firms. The sustainability of theses outcomes over a long period of time was also tested using the Johansen Cointegration Test which indicates cointegrating equations which implies that short run effects and relationships are very sustainable, all things remaining the same. Therefore, firms are encouraged to borrow less as they advance in age. In conclusion, therefore, at maturity stage of the firm, external borrowing should be discouraged in preference to other sources of investible funds.},
     year = {2017}
    }
    

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  • TY  - JOUR
    T1  - Effect of Listing Age on Corporate Financial Leverage of Oil and Gas Firms in Nigeria
    AU  - Inyiama Oliver Ikechukwu
    AU  - Ubesie Madubuko Cyril
    Y1  - 2017/01/26
    PY  - 2017
    N1  - https://doi.org/10.11648/j.ijefm.20170502.12
    DO  - 10.11648/j.ijefm.20170502.12
    T2  - International Journal of Economics, Finance and Management Sciences
    JF  - International Journal of Economics, Finance and Management Sciences
    JO  - International Journal of Economics, Finance and Management Sciences
    SP  - 92
    EP  - 97
    PB  - Science Publishing Group
    SN  - 2326-9561
    UR  - https://doi.org/10.11648/j.ijefm.20170502.12
    AB  - Examination of the effect of listing age on corporate financial leverage of oil and gas firms in Nigeria is the main objective of this study. The study also considers, for sake of robustness, the trend of movement of the variables, the relationships among the variables, as well as the causality of a variable by the other. This made the study a meta-analysis of the time series data. Simple regression was applied to estimate the effect of listing age on financial leverage of the selected firms. Correlation and Granger Causality Tests were applied to ascertain the relationships and causalities among the model variables. The outcome of the analysis is that firm’s Listing Age has a significant but negative effect on Financial Leverage, which implies that, as an oil firm advances in age, the firms’ need for external financing will tend to reduce. Causality test reveals that at a lagged period of one year, there is no causality running from financial leverage to firm age and vice versa. This implies that financial leverage is not caused by listing age of the oil and gas firm or otherwise. When the relationship between firm age and financial leverage was tested, the test reveals that financial leverage has an insignificant negative relationship with firm age in Nigeria Oil and Gas firms. The sustainability of theses outcomes over a long period of time was also tested using the Johansen Cointegration Test which indicates cointegrating equations which implies that short run effects and relationships are very sustainable, all things remaining the same. Therefore, firms are encouraged to borrow less as they advance in age. In conclusion, therefore, at maturity stage of the firm, external borrowing should be discouraged in preference to other sources of investible funds.
    VL  - 5
    IS  - 2
    ER  - 

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Author Information
  • Department of Accountancy, Faculty of Management Sciences, Enugu State University of Science and Technology, Enugu, Nigeria

  • Department of Accountancy, Faculty of Management Sciences, Enugu State University of Science and Technology, Enugu, Nigeria

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