FIRM CHARACTERISTICS AND DISCRETIONARY CASH FLOW IN LISTED OIL AND GAS FIRMS IN NIGERIA

Abstract

The increasing prevalence of earnings management in Nigerian companies indicates that this
practice is quickly becoming a significant issue for stakeholders. Discrepancies in accounting data
are concerning, and the poor quality of financial reporting and accounting data is leading to
growing doubts about the accuracy and usefulness of the information provided in financial reports.
Consequently, this study focused on the relationship between firm characteristics and
discretionary cash flow in listed oil and gas firms in Nigeria. A longitudinal research approach
was employed on a population comprising of the 12 oil and gas companies that were listed as of
the last quarter of 2021 on the Nigerian Exchange Group (NGX). The study adopted secondary
data from the 2002–2021 annual reports of oil and gas companies listed on the Nigerian Exchange
Group while the Pooled Ordinary Least Square (OLS) regression analysis was deployed as the
method of data analysis. The findings revealed that discretionary cash flow and the firm
characteristics of oil and gas firms have a negative significant relationship. Based on the above
findings, this study concluded that an abundance of operating cash flow lessens the propensity to
participate in earnings management. The study therefore recommended that companies listed on
the Nigerian Exchange Group (NGX) should abide by the governance reforms already in place in
the nation, such as sufficient assessment, investigation, and scrutiny of the company's financial
statement and sufficient protocols for the early identification of earnings management practices.