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Oil Price Volatility and Equity Valuation of Listed Energy Companies in Nigeria: A Panel ARDL Model

Author

Listed:
  • Henry Okodua

    (Department of Economics and Development Studies, College of Management and Social Sciences, Covenant University, Ota, Nigeria)

  • Ese Urhie

    (Department of Economics and Development Studies, Covenant University, Ota, Ogun State, Nigeria,)

  • Moses Akpesiri Erhi

    (Department of Economics, Banking and Finance, Benson Idahosa University, Benin City, Edo State, Nigeria.)

  • Christiana Onyohu Hassan

    (Department of Economics and Development Studies, Covenant University, Ota, Ogun State, Nigeria,)

  • Eyitemi Ayomikun Fasanu

    (Department of Economics and Development Studies, Covenant University, Ota, Ogun State, Nigeria,)

Abstract

The study investigates the nexus between oil price volatility and market valuation of listed energy companies in Nigeria, within a dynamic heterogeneous panel model framework. The paper utilizes the pooled mean group estimator in analysing the hypothesized relationship among equity valuation of listed energy companies in Nigeria, oil price volatility, and two control variables firm profitability and inflation rate. The overwhelming weight of the evidence emerging from key findings of the study indicates that a distinct difference exists between the short-run impact of oil price volatility on the equity valuation of oil firms in Nigeria from the long-run impacts. While the short-run results show a mix of negative and positive, but statistically significant impacts of oil price volatility on equity valuation across listed oil firms, the long-run results indicate a statistically significant positive impact of oil price volatility on the stock valuation of energy firms in Nigeria. The short-run results are highly suggestive of the important role of the level of risk investors are willing to accommodate in their decisions to invest in stocks under different economic scenarios, in explaining stock returns for each of the oil-producing firms in Nigeria. The paper concludes that the risk premium investors place on stocks of oil companies is central in explaining the short-run impact of oil price volatility on the equity valuation of oil firms in Nigeria.

Suggested Citation

  • Henry Okodua & Ese Urhie & Moses Akpesiri Erhi & Christiana Onyohu Hassan & Eyitemi Ayomikun Fasanu, 2022. "Oil Price Volatility and Equity Valuation of Listed Energy Companies in Nigeria: A Panel ARDL Model," International Journal of Energy Economics and Policy, Econjournals, vol. 12(5), pages 482-490, September.
    • Handle: RePEc:eco:journ2:2022-05-54
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    References listed on IDEAS

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    1. Mohammad Aladwan & Omar Alsinglawi & Omar M. Alhawatmeh & Mohammad Almaharmeh, 2023. "Corporate Financial Performance and the Intervening Role of Energy Operating Costs: The Case of Jordanian Electricity Sector," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 202-212, September.

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    More about this item

    Keywords

    Oil Price Volatility; Equity Valuation; Energy Companies; Panel ARDL Model; Pooled Mean Group;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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