IIARD International Institute of Academic Research and Development

IIARD International Journal of Economics and Business Management (IJEBM )

E-ISSN 2489-0065
P-ISSN 2695-186X
VOL. 2 NO. 1 2016

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RECOGNITION, DISCLOSURE AND MARKET REACTION IN THE OIL AND GAS SECTOR

*C.O. MGBAME (PhD), P.A.DONWA (PhD), C. A. AGBAKPOLOR

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Abstract

The study examines whether recognition and disclosure have equivalent pricing consequences in the oil and gas industry. That is whether recognition and disclosure have same effects on recognized information and disclosed information. The methodology adopted in this study was the desk research review of the available literature related to recognition, disclosure and pricing consequences. In other words, the methodology adopted in the study was highly exploratory. The study found whether a write down-down is recognized or disclosed, has a significant effect on the firm’s value. The price reactions to firms recognizing losses are negative and differ significantly from the reactions of firms disclosing losses. One of the reasons for this variety is that oil and gas companies perform upstream or integrated activities, as well as the way companies disclose their reserves. Against this Backdrop, the study recommends that for the oil and gas firms recognizing losses and the oil and gas firms disclosing losses to have equivalent pricing consequences, the firms should direct their eyes towards recognized item and fully incorporate disclosed values into prices in the oil and gas industry.

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