IDEAS home Printed from https://ideas.repec.org/a/spr/futbus/v9y2023i1d10.1186_s43093-023-00186-4.html
   My bibliography  Save this article

Impact of capital structure on financial performance of oil and gas firms in Nigeria

Author

Listed:
  • Obumneme Renato Anozie

    (Nile University of Nigeria Abuja)

  • Taiwo Adewale Muritala

    (Nile University of Nigeria Abuja)

  • Victor Edet Ininm

    (Nile University of Nigeria Abuja)

  • Nurudeen Salako Yisau

    (Fountain University Osogbo)

Abstract

This study examines the impact of capital structure on the financial performance of Nigerian oil and gas companies. Using an ex-post facto research methodology, the short-term debt to total asset, long-term debt to total asset, total debt to total equity, and return on asset variables were investigated as proxies for capital structure and financial performance, respectively. Based on the data's availability at the time of the inquiry, the study used an easy sampling strategy to gather secondary data. These data covers the years 2011 through 2020 and were compiled from the annual financial reports of five Nigerian oil and gas companies. Descriptive statistics and panel regression analysis were used to analyze the data. The analysis' findings shows that while long-term debt to total assets has a negative significant influence on return on assets, short-term debt to total assets and total debt to total equity had positive insignificant impacts. According to the findings, managers of oil and gas companies should reduce the amount of long-term debt they have because doing so has a negative effect on their performance. They should also exercise caution when making capital structure decisions.

Suggested Citation

  • Obumneme Renato Anozie & Taiwo Adewale Muritala & Victor Edet Ininm & Nurudeen Salako Yisau, 2023. "Impact of capital structure on financial performance of oil and gas firms in Nigeria," Future Business Journal, Springer, vol. 9(1), pages 1-9, December.
    • Handle: RePEc:spr:futbus:v:9:y:2023:i:1:d:10.1186_s43093-023-00186-4
    DOI: 10.1186/s43093-023-00186-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1186/s43093-023-00186-4
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1186/s43093-023-00186-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Rafiuddin Ahmed & Rafiqul Bhuyan, 2020. "Capital Structure and Firm Performance in Australian Service Sector Firms: A Panel Data Analysis," JRFM, MDPI, vol. 13(9), pages 1-16, September.
    2. Ibrahim El‐Sayed Ebaid, 2009. "The impact of capital‐structure choice on firm performance: empirical evidence from Egypt," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 10(5), pages 477-487, November.
    3. Dimitris Margaritis & Maria Psillaki, 2007. "Capital Structure and Firm Efficiency," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(9‐10), pages 1447-1469, November.
    4. Hariem Abdullah & Turgut Tursoy, 2021. "Capital structure and firm performance: evidence of Germany under IFRS adoption," Review of Managerial Science, Springer, vol. 15(2), pages 379-398, February.
    5. Julius B. Adesina & Barine M. Nwidobie & Oluwatosin O. Adesina, 2015. "Capital Structure and Financial Performance in Nigeria," International Journal of Business and Social Research, LAR Center Press, vol. 5(2), pages 21-31, February.
    6. Julius B. Adesina & Barine M. Nwidobie & Oluwatosin O. Adesina, 2015. "Capital Structure and Financial Performance in Nigeria," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 5(2), pages 21-31, February.
    7. Ibrahim El-Sayed Ebaid, 2009. "The impact of capital-structure choice on firm performance: empirical evidence from Egypt," Journal of Risk Finance, Emerald Group Publishing, vol. 10(5), pages 477-487, November.
    8. Vo, Xuan Vinh & Ellis, Craig, 2017. "An empirical investigation of capital structure and firm value in Vietnam," Finance Research Letters, Elsevier, vol. 22(C), pages 90-94.
    9. Margaritis, Dimitris & Psillaki, Maria, 2010. "Capital structure, equity ownership and firm performance," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 621-632, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shoaib Khan & Tahir Akhtar & Ameen Qasem, 2024. "Dynamics of capital structure determinants: empirical evidence from GCC countries," Future Business Journal, Springer, vol. 10(1), pages 1-18, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Abdullah, Hariem & Tursoy, Turgut, 2021. "Capital structure and firm performance: a panel causality test," MPRA Paper 105871, University Library of Munich, Germany.
    2. Evans Akomeah & Paula Bentil & Alhassan Musah, 2018. "The Impact of Capital Structure Decisions on Firm Performance: The Case of Listed Non-Financial Institutions in Ghana," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(4), pages 1-15, October.
    3. Lukman Adebayo Oke & Daud Omotosho Saheed & Yusuf Olamilekan Quadri, 2019. "An Empirical Analysis Of Corporate Capital Structure And Financial Performance Of Listed Conglomerates In Nigeria," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 8(3), pages 95-114.
    4. Chiwei SU & Kaihua WANG, 2022. "Does Optimal Capital Structure Exist in Chinese Military Enterprises? Evidence from Industrial Heterogeneity," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 128-149, December.
    5. Almanaseer Sufian, 2024. "The Impact of Equity Financing on Financial Performance: Evidence from Jordan," Foundations of Management, Sciendo, vol. 16(1), pages 157-176.
    6. Zaheda Daruwala, 2023. "Influence of Financial Leverage on Corporate Profitability: Does it Really Matter?," International Journal of Economics and Financial Issues, Econjournals, vol. 13(4), pages 37-46, July.
    7. Hariem Abdullah & Turgut Tursoy, 2021. "Capital structure and firm performance: evidence of Germany under IFRS adoption," Review of Managerial Science, Springer, vol. 15(2), pages 379-398, February.
    8. Vu, Loan T. & Vu, Anh T. H. & Nguyen, Thao T. P., 2021. "Impacts of Capital Structure and Dividend Policy on the Financial Performance of Listed Companies on Vietnamese Stocks Market," OSF Preprints u8pd9, Center for Open Science.
    9. Mohammad Nourani & Irene Wei Kiong Ting & Wen-Min Lu & Qian Long Kweh, 2019. "Capital Structure And Dynamic Performance: Evidence From Asean-5 Banks," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(03), pages 495-516, June.
    10. Amanj Mohamed Ahmed & Nabard Abdallah Sharif & Muhammad Nawzad Ali & István Hágen, 2023. "Effect of Firm Size on the Association between Capital Structure and Profitability," Sustainability, MDPI, vol. 15(14), pages 1-17, July.
    11. Seid Muhammed & Goshu Desalegn & Prihoda Emese, 2024. "Effect of Capital Structure on the Financial Performance of Ethiopian Commercial Banks," Risks, MDPI, vol. 12(4), pages 1-15, April.
    12. Jaroslav Mazanec, 2023. "Capital Structure and Corporate Performance: An Empirical Analysis from Central Europe," Mathematics, MDPI, vol. 11(9), pages 1-19, April.
    13. Ekote Nelson Nnoko & Yuji Maeda, 2023. "Impacts and risks of borrowing on corporate performance: evidence from Japan and Sub-Saharan Africa," Asia-Pacific Journal of Regional Science, Springer, vol. 7(1), pages 119-133, March.
    14. Abdulkadir Ali Tifow & Ozlem Sayilir, 2015. "Capital Structure and Firm Performance: An Analysis of Manufacturing Firms in Turkey," Eurasian Journal of Business and Management, Eurasian Publications, vol. 3(4), pages 13-22.
    15. Francis Kipkoech Chirchir & Fredrick M. Kalui & Justus Tari, 2024. "Capital Structure and Financial Performance of Non-Financial Firms Listed at Nairobi Securities Exchange, Kenya," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(7), pages 534-543, July.
    16. Muhammad Iqbal & Faisal Javed, 2017. "The Moderating Role of Corporate Governance on the Relationship between Capital Structure and Financial Performance: Evidence from Manufacturing Sector of Pakistan," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 6(1), pages 89-105, January.
    17. Hanousek, Jan & Kočenda, Evžen & Shamshur, Anastasiya, 2015. "Corporate efficiency in Europe," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 24-40.
    18. Abd Hadi Mustaffa & Nur Zahidah Bahrudin & Zahariah Sahudin & Hasni Abdullah & Muhammad Ridzuan Abdul Aziz, 2023. "What have we Learned from Firm Efficiency Research for the Past 35 Years? A Bibliometric Analysis," Information Management and Business Review, AMH International, vol. 15(1), pages 216-227.
    19. Mazen Kebewar, 2012. "L'Impact De L'Endettement Sur La Profitabilité Une Étude Empirique Sur Données Françaises En Panel," Working Papers halshs-00749685, HAL.
    20. Kebewar, mazen, 2013. "Does debt affect profitability? An empirical study of French trade sector," MPRA Paper 43968, University Library of Munich, Germany.

    More about this item

    Keywords

    Capital structure; Financial performance; Oil and gas firms; Nigeria;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:futbus:v:9:y:2023:i:1:d:10.1186_s43093-023-00186-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.