Performance Management and Market Capitalisation of Listed Oil and Gas Companies in Nigeria

Abstract

Market capitalization has become a universally accepted indicator of business valuation. The capitalization of a company is the product of the price of a share for the number of shares issued and listed. The global market crash of 2008 led to the Nigerian stock market losing nearly N9 trillion causing many shareholders to lose interest in the capital market. The inconsistency of reduced dividend payments, dwindling retained earnings and re-investment of profits by the management of these companies are creating worries and concerns for financial analysts and shareholders at large which have adversely affected market capitalization. Therefore, the study examined the effect of performance management on the market capitalization of listed oil and gas companies in Nigeria. The study adopted an ex-post facto research design and the population consisted of 11 listed oil and gas companies. The sampling techniques were purposive and convenient. Data used were secondary data from financial statements of the 6 selected listed oil and gas companies. The validity and reliability were premised on a statutory audit of the financial statements. Data were analyzed using descriptive and inferential statistics and Performance Management (PM) measure significantly affects with Market Capitalization of oil and gas companies listed in Nigeria F-Stat/Wald Stat (Prob) = F (5, 114) = 123.11 (0.0000) , AdjR 2 = 0.8369, P< 0.05). The study recommends that managers should not be interested in estimating previous costs behaviour patterns only in projects appraisal, they should be investigating cost dependence and their behaviour on different factors to reduce their overhead cost. Knowledge of cost behaviour and dependence may lead to lower overheads (production and administrative) that ultimately result in a better valuation of market capitalization.