Firm Characteristics and Discretionary Cash Flow in Listed Oil and Gas Firms in Nigeria

Abstract

Research Purpose: In Nigeria's oil and gas sector, this study explores how firm characteristics influence discretionary cash flow among listed firms. With governance reforms shaping financial practices, understanding this relationship is crucial for enhancing transparency and accountability in the industry.

Methodology: Employing a longitudinal approach, the study focuses on 12 oil and gas companies listed on the Nigerian Exchange Group. Secondary data from 2002 to 2021 annual reports form the basis of analysis, utilising Pooled Ordinary Least Square (OLS) regression.

Findings: The study reveals a significant negative relationship between firm characteristics and discretionary cash flow in Nigerian oil and gas firms. Abundant operating cash flow reduces the inclination towards earnings management, highlighting the importance of transparency and accountability.

Conclusion: This study concludes that robust governance reforms, such as enhanced scrutiny and early detection protocols for earnings management, are essential for listed oil and gas firms on the Nigerian Exchange Group. Transparency and accountability are vital for sustainable growth and investor confidence.

Recommendations: Listed firms on the Nigerian Exchange Group (NGX) should adhere to existing governance reforms, ensuring thorough assessment and scrutiny of financial statements. Implementing protocols for early detection of earnings management practices can bolster investor trust and strengthen the integrity of the industry.