Please enter verification code
Confirm
Effect of Listing Age on Corporate Financial Leverage of Oil and Gas Firms in Nigeria
International Journal of Economics, Finance and Management Sciences
Volume 5, Issue 2, April 2017, Pages: 92-97
Received: Aug. 17, 2016; Accepted: Jan. 4, 2017; Published: Jan. 26, 2017
Views 3728      Downloads 215
Authors
Inyiama Oliver Ikechukwu, Department of Accountancy, Faculty of Management Sciences, Enugu State University of Science and Technology, Enugu, Nigeria
Ubesie Madubuko Cyril, Department of Accountancy, Faculty of Management Sciences, Enugu State University of Science and Technology, Enugu, Nigeria
Article Tools
Follow on us
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.
Keywords
Leverage, Oil, Life Cycle, Gas, Age, Regression, Cointegration
To cite this article
Inyiama Oliver Ikechukwu, Ubesie Madubuko Cyril, Effect of Listing Age on Corporate Financial Leverage of Oil and Gas Firms in Nigeria, International Journal of Economics, Finance and Management Sciences. Vol. 5, No. 2, 2017, pp. 92-97. doi: 10.11648/j.ijefm.20170502.12
Copyright
Copyright © 2017 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
References
[1]
Ahmed, H., & Javid, A. Y. (2009). Determinants of Dividend Policy in Pakistan, International Research Journal of Finance and Economics, Issue 29, pp. 110-125.
[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.
[4]
Bevan, A., & Danbolt, J. (2000), Dynamics in the Determinants of Capital Structure in the UK, University of Glasgow, Working paper, 1-10.
[5]
Cassia, L. & Minola, T. (2011). Capital structure decision of new technology-based firms: evidence from youth entrepreneurship, Investment Management and Financial Innovations, 8 (4), 72–82.
[6]
Ekwe, M., & Inyiama, O. (2014). Revenue Reserves and Financial Performance in the Brewery Industry: Evidence from Nigeria. Applied Economics and Finance. Vol. 1, No. 2; 117-131.
[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.
[9]
Ghazouani, T. (2013). The Capital Structure through the Trade-Off Theory: Evidence from Tunisian Firm, International Journal of Economics and Financial Issues. 3 (3), 625-636.
[10]
Harrison, B. & Widjaja, T. (2013). Did the Financial Crisis Impact on the Capital Structure of Firms? Discussion Papers in Economics, Nottingham Trent University, 1 – 45.
[11]
Johansen, S., & K. Juselius, (1990) ‘Maximum Likelihood Estimation and Inference on Cointegration – With Applications to the demand for money’, Oxford Bulletin of Economics and Statistics. 52,169-210.
[12]
Mueller, D, C. (1972). A Life Cycle Theory of the Firm, “Journal of Industrial Economics” 20 (3), 199-219.
[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.
[14]
Myers, S. C. (2001), Capital Structure. “Journal of Economics Perspectives.” 15 (2), 81-102.
[15]
Pasquale, F. (2006). “Testing for Granger Causality between Stock Prices and Economic Growth”. MPRA Paper 2962, University Library of Munich, Germany, revised 2007.
[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.
[17]
Sherif, M. & Elsayed, M. (2013). The Impact of Corporate Characteristics on Capital Structure: Evidence from the Egyptian Insurance Companies, Pacific-Basin Finance Journal, 1 – 27.
[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].
[19]
Titman, S. & Wessels, R. (1988), The Determinants of Capital Structure Choice. Journal of Finance. 43, 1-19.
[20]
Tamimi and Takhtaei (2014). Relationship between Firm Age and Financial Leverage with Dividend Policy. Asian Journal of Finance & Accounting. 6, (2).
ADDRESS
Science Publishing Group
1 Rockefeller Plaza,
10th and 11th Floors,
New York, NY 10020
U.S.A.
Tel: (001)347-983-5186