EFFECT OF DEBT FINANCING ON THE FINANCIAL PERFORMANCE OF OIL AND GAS FIRMS IN NIGERIA
Keywords:
financial leverage ratio, equity financing, long term debt, short term debt, Debt financingAbstract
This study analyzed the effect of debt financing on the financial performance of oil and gas firms in Nigerian Exchange Limited for the period of 2012-2023. The variables were financial performance as the dependent variables while financial leverage ratio, equity financing, long term debt and short term debt, were the independent variables. These variables were source from the annual report of the selected firm. Panel Least Squared (PLS) method of data analysis was used. The population of the study was 10 listed oil and gas firms, while the sample size was eight (8) oil and gas firm. The study found that, financial leverage ratio has no significant impact on the return on assets of oil and gas firms in Nigerian Exchange Limited. (T-test 1.477134, p=0.1441). Equity financing has positive and significant impact on return on assets of oil and gas firms in Nigeria (t-test 3.208922, p=0.0007) Long term debt has positive and significant impact on the return on assets of oil and gas firms in Nigeria (T-test 2.203395, p=0.0308). The study recommended Since the study found that Financial leverage ratio has insignificant effect on return on Assets, the study as well recommend that oil and gas sector should reduce leverage ratio and consider a balanced mix of debt and equity to optimize performance; The study found that Equity financing has significant effect on return on Assets, the study recommend that Oil and gas firms should strategically manage their equity, emphasizing effective equity utilization for growth initiatives while maintaining investor confidence through transparent and strategic benefits of higher performance; The study found that long term debt has significant effect on return on Assets, Oil and gas firms are encouraged to explore a balanced of long term debt structure, recognizing the potential benefits of long term debt enhancing firm value, but ensuring that debt is prudently managed to mitigate associated risks and enhance performance
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