What Is the Economic Value of the Extractive Industries Transparency Initiative (EITI) Information Disclosure?

Posted: 29 Nov 2016 Last revised: 18 May 2019

See all articles by Olayinka Moses

Olayinka Moses

Victoria University of Wellington, Victoria Business School

Noor Houqe

School of Accountancy

Tony van Zijl

Victoria University of Wellington - Faculty of Commerce and Administration

Date Written: November 25, 2016

Abstract

We examine the stock market reaction to the unilateral release of natural resources revenue payments information by the United States Department of the Interior in pursuance of the United States Extractive Industries Transparency Initiative (USEITI) candidacy implementation process. Our study provides, for the first time, an illustration of the economic value of information disclosed under the requirements of the Extractive Industries Transparency Initiative. Standard event study methodology, using a two-factor model incorporating an oil and gas industry index, is used to measure average cumulative abnormal return around the event date of the release of this information. We find positive average cumulative abnormal returns during the event period associated with the release of this financial information. The results thus show that, on average, the market reacts positively to the release of this information. The findings indicate that investors consider EITI information be relevant for the valuation of extractive companies, and thus, important for national resource allocation.

Keywords: Event study, Market reaction, Extractive Industries Transparency Initiative, U.S. extraction issuers, Natural resources, Dodd-Frank Act

Suggested Citation

Moses, Olayinka and Houqe, Muhammad Nurul and van Zijl, Tony, What Is the Economic Value of the Extractive Industries Transparency Initiative (EITI) Information Disclosure? (November 25, 2016). 8th Conference on Financial Markets and Corporate Governance (FMCG) 2017. Available at SSRN: https://ssrn.com/abstract=2875911

Olayinka Moses (Contact Author)

Victoria University of Wellington, Victoria Business School ( email )

Wellington
New Zealand

Muhammad Nurul Houqe

School of Accountancy ( email )

New Zealand

Tony Van Zijl

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

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

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