An Overview: Oil and Gas Capital Structure

Abstract

The topic of capital structure has long been studied by researchers and constitutes one of the most active areas in the field of finance. Studies typically contain empirical evidence and theoretical explanation on how capital structure decisions have been driven by different determinants. However, to date, limited efforts have been devoted to the oil and gas industry even though this industry has a significant impact on economics for most of the countries in the world. Thus, it is important to draw attention to the factors that have an influence on capital structure decisions in the context of the oil and gas industry. Therefore, this study is to reviews empirical evidence that have employed firm-specific factors that generally had been accepted by researchers to be the determinants of capital structure as a way to assess such factors in understanding what motivates oil and gas firms to select a particular source of fund and to provide a significant indication which a firm has to consider before deciding on its capital structure decisions. This information is useful for researchers' studies on oil and gas industry capital structure to underline the research direction.

Determinants of Financial Leverage in Oil and Gas Listed Firms: Evidence from Malaysia

“…OIL PRICE AND FINANCIAL LEVERAGE Narayan and Nasiri (2020) assert that oil prices notably influence corporate leverage decisions. Hamzah and Marimuthu (2020) support this argument, explaining that oil and gas prices can significantly impact companies' earnings as they are susceptible to economic cycles. When oil-producing firms generate higher income from increased oil prices, their leverage rises.…”

“…In assessing firm-specific determining factors of leverage, numerous studies have been undertaken, such as in manufacturing (Zulvia & Roza Linda 2019) and the food and beverage sector (Wahida & Noor Azillah 2015). However, there is a dearth of research on a similar topic for oil and gas firms (Hamzah & Marimuthu 2020). This becomes an important issue to study as the oil market has a different debt usage from the other markets, contributed by the difference in investment risk of oil projects, internal financing, and the direct influence of oil price shocks (Narayan & Nasiri 2020).…”

The role of environmental policies in shaping oil and gas operations: A comparative review of Africa and the USA

“…The oil and gas industries play a crucial role in the global economy, providing the primary sources of energy and raw materials for various sectors (Hamzah & Marimuthu, 2020). However, the environmental impact of these operations has raised significant concerns regarding sustainability (Testa et al, 2020).…”

Factors Influencing Capital Structure: An Empirical Evaluation of Major Oil and Gas Producing Companies Operating in Ghana

“…Equity and debt both have distinct risks and returns. Therefore, a balanced debt-to-equity ratio not only lowers the cost of financing, but also boosts the company's worth and the wealth of its owners (Hamzah and Marimuthu, 2019). It can be difficult to balance the proportion of debt and equity.…”