FINANCIAL LEVERAGE AND EARNINGS MANIPULATION AMONG LISTED OIL AND GAS FIRMS IN NIGERIA

Abstract

The oil and gas sector is characterised by high capital intensity, volatile cash flows, and significant exposure to debt financing. This study examines the influence of financial leverage and earnings manipulation among the listed oil and gas companies in Nigeria. The study employs both the Accrual-based (DA) and the Real Earnings Management (REM) proxies for earnings manipulation. The financial leverage is calculated based on total debt to total assets, whereas the control variables are firm size, profitability, firm growth, and working capital. Secondary data were gathered from financial reports of eight (8) chosen oil and gas listed firms in Nigeria, which were obtained from the Machameratio database for eleven (11) years, from 2013 to 2023. The study based on monitoring hypothesis. Data were analysed in three stages preliminary, model estimation, and post-estimation test using panel data regression on STATA 15 to ascertain the strength and the direction of between study variables. The findings reveal that financial leverage has a negative and significant effect on DA and REM. However, firm size has a positive and significant influence on DA and REM. Furthermore, profitability has a negative and significant influence on DA and REM. Nonetheless, firm growth reveals a negative and significant influence on REM. Thus, the study concludes that financial leverage negatively influencing DA and REM while firm size and profitability are significant factors that influence earnings manipulation in listed oil and gas firms. Moreover, firm growth only influences REM.