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.

Keywords

• Discretionary cash flow
• Firm characteristics
• Income manipulation