Market Reaction to Unilateral Release of Extractive Issuers’ Payments by United States Department of the Interior

Posted: 23 Jan 2016

See all articles by Olayinka Moses

Olayinka Moses

Victoria University of Wellington, Victoria Business School

Tony van Zijl

Victoria University of Wellington - Te Herenga Waka - Faculty of Commerce and Administration

Noor Houqe

School of Accountancy

Multiple version iconThere are 2 versions of this paper

Date Written: January 21, 2016

Abstract

Notwithstanding significant contributions of Extractive Industries Transparency Initiate (EITI) to resource-rich countries accountability and transparency, the question of how information content by extractives firms’ payments affect companies remains unanswered. We examine stock market reaction to premiere unilateral release of natural resources revenue payments by United States Department of the of Interior (DOI) in pursuance of U.S. Extractive Industries Transparency Initiative candidacy implementation process. This innovative disclosure relate to firms’ specific non-tax payments data received by the Office of Natural Resources Revenue (ONRR) for 2013 calendar year. Using the two factor event study model incorporating oil and gas industry index we find average positive cumulative abnormal return during event period following the unilateral release of this financial information. The result show that the market reacts positively to new information as part of appropriate corporate disclosure, in addition it offers investors’ opportunity to evaluate firm’s future flow of revenue associated with natural resources exploration and project engagements. The result confirm previous studies’ prediction on information content and announcements, however, it goes further to show that information content with additional processed details and usability help market participants in making informed valuation judgement about extractive issuers.

Keywords: Extractive Industries Transparency Initiate (EITI); natural resources; market reaction; event studies, unilateral disclosure; United States Extractive Industries Transparency Initiate (USEITI), Transparency and Accountability Initiatives(TAIs)

Suggested Citation

Moses, Olayinka and van Zijl, Tony and Houqe, Muhammad Nurul, Market Reaction to Unilateral Release of Extractive Issuers’ Payments by United States Department of the Interior (January 21, 2016). 2016 Financial Markets and Corporate Governance, Available at SSRN: https://ssrn.com/abstract=2719923 or http://dx.doi.org/10.2139/ssrn.2719923

Olayinka Moses (Contact Author)

Victoria University of Wellington, Victoria Business School ( email )

Wellington
New Zealand

Tony Van Zijl

Victoria University of Wellington - Te Herenga Waka - Faculty of Commerce and Administration ( email )

RH 606, Pipitea Campus, 6th Floor, Rutherford Hous
23 Lambton Quay
Wellington
Australia

Muhammad Nurul Houqe

School of Accountancy ( email )

New Zealand

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