Effect of Financial Leverage and Dividend Policy on Share Value of Quoted Oil and Gas Companies in Nigeria

Abstract

The study examines the impact of financial leverage and dividend policy on share value of quoted oil and gas companies in Nigeria. A total sample of eight oil and gas companies quoted on the Nigerian Stock Exchange were studied, and panel data was obtained from their annual reports and accounts and price list from the Nigerian Stock Exchange for a period of 10 years (2011-2020). The data was analysed using descriptive statistics and panel regression technique with the help of Stata 10 package. The study finds that the financial leverage measures; total debt to total capital ratio have significant positive impact on share value of the quoted oil and gas companies in Nigeria. Similarly, it was found that the share value of the companies was positively and significantly driven by the dividend policy indicator; retained earnings ratio. The study conclude that dividend policy is capable of influencing the stock prices in oil and gas sector of the Nigerian stock market. The study recommends that the management of the quoted oil and gas companies in Nigeria should explore the use of more debt capital in financing their investment opportunities in order to boost their share value in the capital market. Finally, management of the companies should retain a larger proportion of the company’s earnings for growth and ensure strict utilization of retained earnings on profitable investments and viable projects that will enhance the company’s financial health and consequently boost the share value of the company in the stock market.