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Robustness of firm-specific and macroeconomic determinants of exploration investments

Author

Listed:
  • Tarek Eldomiaty
  • Ibrahim Safwat Lotfy
  • Mohamed Rashwan
  • Mohamed Bahaa El Din

Abstract

Purpose - The 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/approach - The study utilizes the properties of discriminant analysis for derivingZ-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. Findings - The 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/value - The study offers robust evidence that amount and growth of exploration investment are quiet relevant for measuring firm performance in the oil and gas industry.

Suggested Citation

  • Tarek Eldomiaty & Ibrahim Safwat Lotfy & Mohamed Rashwan & Mohamed Bahaa El Din, 2016. "Robustness of firm-specific and macroeconomic determinants of exploration investments," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 32(2), pages 137-159, November.
    • Handle: RePEc:eme:jeaspp:jeas-02-2016-0004
    DOI: 10.1108/JEAS-02-2016-0004
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    More about this item

    Keywords

    Cointegration analysis; Egypt; Johansen cointegration; Discriminant analysis; Oil and gas exploration investments; Performance measures- growth rates – VaR; International oil companies (IOCs); M21; L71; F21; E32;
    All these keywords.

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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