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The Value Relevance of Oil and Gas Disclosures: An Assessment of the Market's Perception of Firms' Effort and Ability to Discover Reserves

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  • Kevin T. Berry
  • Charlotte J. Wright

Abstract

The purpose of this study is to determine whether supplemental reserve disclosures contain value‐relevant information by examining the extent to which they convey information regarding firms' effort and ability to discover reserves. Using Ohlson's (1995) model as a framework, two hypotheses were developed and tested. The empirical results indicate that both effort and ability to discover reserves are significant in explaining the market value of full cost firms. However, only effort is significant (marginally) in explaining the market value of successful efforts firms.

Suggested Citation

  • Kevin T. Berry & Charlotte J. Wright, 2001. "The Value Relevance of Oil and Gas Disclosures: An Assessment of the Market's Perception of Firms' Effort and Ability to Discover Reserves," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(5‐6), pages 741-769, June.
    • Handle: RePEc:bla:jbfnac:v:28:y:2001:i:5-6:p:741-769
    DOI: 10.1111/1468-5957.00392
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    Cited by:

    1. Cannizzaro, Anthony P. & Weiner, Robert J., 2015. "Multinational investment and voluntary disclosure: Project-level evidence from the petroleum industry," Accounting, Organizations and Society, Elsevier, vol. 42(C), pages 32-47.
    2. Tega Anighoro, 2020. "Value relevance of the components of oil and gas reserve quantity change disclosures of upstream oil and gas companies in the london stock exchange," Papers 2005.14659, arXiv.org.
    3. Abdo, Hafez & Mangena, Musa & Needham, Graham & Hunt, David, 2018. "Disclosure of provisions for decommissioning costs in annual reports of oil and gas companies: A content analysis and stakeholder views," Accounting forum, Elsevier, vol. 42(4), pages 341-358.
    4. Teng Zhou & Jacqueline Birt & Michaela Rankin, 2015. "The value relevance of exploration and evaluation expenditures," Accounting Research Journal, Emerald Group Publishing Limited, vol. 28(3), pages 228-250, November.
    5. Corinne Cortese & Lee Moerman & Millicent Chang, 2022. "Is the extractive industries standard still fit for purpose?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(2), pages 2807-2838, June.
    6. Moses, Olayinka & Houqe, Muhammad Nurul & van Zijl, Tony, 2018. "What is the economic value of the Extractive Industries Transparency Initiative (EITI) information disclosure?," Journal of Contemporary Accounting and Economics, Elsevier, vol. 14(2), pages 216-233.
    7. Misund, Bård, 2015. "Reserves Replacement and Oil and Gas Company Shareholder returns," UiS Working Papers in Economics and Finance 2015/11, University of Stavanger.
    8. Carol A. Marquardt & Christine I. Wiedman, 2004. "The Effect of Earnings Management on the Value Relevance of Accounting Information," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(3-4), pages 297-332.
    9. Ng, Alex & Donker, Han, 2013. "Purchasing reserves and commodity market timing as takeover motives in the oil and gas industry," Energy Economics, Elsevier, vol. 37(C), pages 167-181.
    10. Misund, Bård, 2015. "Accounting for Oil and Gas Exploration Activities: A Triumph of Economics over Politics," UiS Working Papers in Economics and Finance 2015/15, University of Stavanger.
    11. Suliman Alshahmy & Hafez Abdo, 2023. "Impacts of reserve and decommissioning disclosures on value and performance of oil and gas firms listed in the UK," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 20(2), pages 168-184, June.

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