Effect of Corporate Charges on Earnings of Oil and Gas Firms in Nigeria

This study investigated the effect of corporate charges on the earnings of oil and gas firms listed on the Nigeria Stock Exchange. Specifically, the study examined the effect of audit fees, and interest expenses, Panel data were extracted from the annual reports and financial statements of the firms and analyzed using descriptive statistics and panel data regression analysis. Findings from the study indicate that the effect of audit fees and insurance expenses on earnings per share of the firms are positive and statistically significant. Findings equally show that the effect of interest expense on earnings per share is negative, but statistically non-significant while the effect of licenses/levies on earnings per share is positive and statistically non-significant. These findings imply that earnings per share of the firms will rise as audit fees while will fall as interest expenses on borrowed funds increase. Based on these findings, the study recommended that a reasonable audit fee should be paid to the external auditors annually during the audit of the accounts and financial statements of the oil and gas firms. This is to maintain auditors' independence, prevent earnings management and boast the real earnings of the oil and gas firms. It was also recommended that each oil and gas firm should determine its optimal capital structure to borrow within the optimal structure. More importantly, the firms should properly negotiate the terms of their debt before any borrowing to bring down interest expenses on borrowed funds. It was further recommended that the firms should pay their licenses/levies as at and when due. This will give them the necessary legal rights to acquire properties, explore, mine, and produce oil and gas without interference from the government or property owners. Finally, it was recommended that the oil and gas firms should pay adequate insurance premiums annually to cover their various risks such as fire, property insurance, motor vehicle, and life of workers among others. Adequate premium will ensure that enough claims are paid by the insurer to the insured to stabilize earnings in the event of the occurrence of the events insured against.