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Robustness of firm-specific and macroeconomic determinants of exploration investments

Robustness of firm-specific and macroeconomic determinants of exploration investments PurposeThe uncertainty that surrounds oil and gas exploration environments call for an examination at different angles. In terms of robustness, the purpose of this paper is to focus on three performance measurements: the amount of exploration investments, the growth rate of exploration investments, and the value at risk (VaR) of exploration investments.Design/methodology/approachThe study utilizes the properties of discriminant analysis for deriving Z-score models that can be used for monitoring firms’ performance. A cointegration analysis is utilized as well in order to examine the level of cointegration between predictors of each performance measure. The sample includes annual data for 41 firms (local and multinational) working in the oil and gas industry in Egypt for the period 2009-2014.FindingsThe results show that amount and growth of exploration investment are quite robust performance measures in the oil and gas industry; VaR of exploration investment is sporadic as it firm-specific; and GDP, capital expenditure and operating expenditure are quite relevant for managing and monitoring growth of exploration investments.Originality/valueThe study offers robust evidence that amount and growth of exploration investment are quiet relevant for measuring firm performance in the oil and gas industry. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic and Administrative Sciences Emerald Publishing

Robustness of firm-specific and macroeconomic determinants of exploration investments

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1026-4116
DOI
10.1108/JEAS-02-2016-0004
Publisher site
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Abstract

PurposeThe uncertainty that surrounds oil and gas exploration environments call for an examination at different angles. In terms of robustness, the purpose of this paper is to focus on three performance measurements: the amount of exploration investments, the growth rate of exploration investments, and the value at risk (VaR) of exploration investments.Design/methodology/approachThe study utilizes the properties of discriminant analysis for deriving Z-score models that can be used for monitoring firms’ performance. A cointegration analysis is utilized as well in order to examine the level of cointegration between predictors of each performance measure. The sample includes annual data for 41 firms (local and multinational) working in the oil and gas industry in Egypt for the period 2009-2014.FindingsThe results show that amount and growth of exploration investment are quite robust performance measures in the oil and gas industry; VaR of exploration investment is sporadic as it firm-specific; and GDP, capital expenditure and operating expenditure are quite relevant for managing and monitoring growth of exploration investments.Originality/valueThe study offers robust evidence that amount and growth of exploration investment are quiet relevant for measuring firm performance in the oil and gas industry.

Journal

Journal of Economic and Administrative Sciences – Emerald Publishing

Published: Nov 21, 2016

References

  • Financial ratios, discriminant analysis and the prediction of corporate bankruptcy