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

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.