Effect of Firms Characteristics on Capital Structure of Listed Oil and Gas Firms in Nigeria

Effect of Firms Characteristics on Capital Structure ofListed Oil and Gas Firms in Nigeria 1. Introduction Therefore, studies suggest that companies without borrowings (unleveraged firms) show less fluctuation in their earnings, whereas companies with borrowings (leveraged firms) show greater fluctuation in their earnings as their financial performance changes.The determination of debt and equity is an important decision faced by firms (Glen and Pinto, 1998).Therefore, some basic implications of borrowing on leveraged firms may be defined as follows; borrowings include interest payments that, in effect, slash the net income of firms, interest expenses as fixed costs that increase the volatility of net incomes and thus affect EPS and borrowings, also reduce the share of equity in the capital structure of a company and thus reduce the number of o Companies must therefore carefully arrange their capital mix so that it is possible to obtain the best possible outcome.Morris and Bereta (2008) concluded that an ideal mix of capital structure is one that not only maintains stability but also increases the wealth of the organization.However, when making this critical and challenging financial decision, many factors have to be considered, because a wrong turn could even lead the company to financial instability or distress.which is not the aim of a going concern.For these reasons and more, studies have made attempt to determine the factors that determine capital structure of firms.Chechet, Garba and odudu (2013) believe that, because the decision on the capital structure is a long-term issue, managers will be advised and know how to change their financial mix to the optimum level by recognizing the variables that decide the overtime of the capital structure.But, according to Bundala (2012), these factors are not definitive and cannot be generalized since there are micro factors that can be affected by a specific country's technology and functional political policies.Masnoon and Anwar (2012) also observed that apart from country specific and institutional factors, firms related factors are major important factors that can influence capital structure choice.Therefore, firm characteristics play an important role in capital structure decisions and are referred to as incentive variables that are relatively sticky at firm's level across time.They are variables that affects the firm decisions both externally and internally (Shehu, 2012).These characteristics are distinct and are believed to impact differently on capital structure of firms.The incentives range from liquidity, profitability, growth, size, age, non-debt tax shields, business risk, and asset tangibility among others.So, firms' managements need to be aware of them so that appropriate decisions on capital structure mix can be takenThe issue of capital structure Therefore, in capital structure decisions, firm characteristics play an important role and are referred to as compensation variables that are relatively sticky over time at the level of the organization.These are variables that both externally and internally affect company decisions (Shehu, 2012).These characteristics are different and are believed to affect the capital structure of companies differently.Among other items, the incentives range from liquidity, profitability, growth, size, age, non-debt tax shields, business risk, and asset tangibility.Therefore, the management of companies needs to be aware of them in order to make appropriate decisions on the mix of capital structures.has been debated for several years and still remain the most significant unsettled issues in the field of finance