Effect of Debt Financing on Firm Value of Listed Oil and Gas Companies in Nigeria

Abstract

This study examines the effect of debt financing on the firm value of listed oil and gas companies in Nigeria for the period of ten (10) years, spanning from 2013 to 2022. The population of the study encompasses all the ten (10) oil and gas companies listed on the Nigerian Exchange Group (NGX) as at 31st December 2022 from which seven (7) oil and gas companies were sampled using a purposive sampling technique. For the purpose of this study, data were extracted from published annual audited reports of the sampled oil and gas companies. For data analysis purpose, Multiple regression analysis were employed. firm value was proxies by Market Capitalization (MCAP), while, short-term debt, long term debt and total debt are the proxies for debt financing. The regression result of the preferred fixed effect model reveals that short term debt and long-term debt has a significant negative effect on MCAP. while total debt has a significant positive effect on MCAP. whereas, the control variables; firm size has a significant positive effect on MCAP, while firm growth has insignificant negative effect on MCAP. It's concluded that debt finance enhances the value of Nigerian oil and gas companies when it employs total debt financing. Hence, the study recommends that firm managers of listed oil and gas companies in Nigeria to suitably modify the debt mix prior to starting financing programs with total debt. And the study also suggested that future researchers to re-examine the effect of debt financing on the firm value of listed oil and gas companies in Nigeria while utilizing ROA and ROE as proxies for firm value period of 2013-2023.