Does oil price affect the value of firms? Evidence from Tunisian listed firms

Abstract

A new debate on the potential impact of oil price changes on the value of firms was initiated in this paper. Using a stochastic frontier approach, an attempt was made to derive the optimal value Q* of firms and calculate the Q value observed. Then the shortfall (Q*–Q) which represents the inefficiency term was explained. Starting from 19 industrial Tunisian firms listed on the Tunis Stock Exchange between 2007 and 2011, the fact that variation of oil prices can largely explain distortions in the value of firms was empirically demonstrated.

Keywords

oil price / value of firm / stochastic frontier approach / industrial Tunisian firms

References

[1] Huang R D, Masulis R W, Stoll H R. Energy shocks and financial markets. Journal of Futures Markets, 1996, 16(1): 1–27

[2] Jones C M, Kaul G. Oil and the stock markets. Journal of Finance, 1996, 51(2): 463–491

[3] Hamilton J D. Oil and the m+9878 acroeconomy since World War II. Journal of Political Economy, 1983, 91(2): 228–248

[4] Lizardo R A, Mollick A V. Oil price fluctuations and U.S. dollar exchange rates. Energy Economics, 2010, 32(2): 399–408

[5] Sadorsky P. Oil price shocks and stock market activity. Energy Economics, 1999, 21(5): 449–469

[6] Chiou J S, Lee Y H. Jump dynamics and volatility: oil and the stock markets. Energy, 2009, 34(6): 788–796

[7] Haushalter G D, Heron R A, Lie E. Price uncertainty and corporate value. Journal of Corporate Finance, 2002, 8(3): 271–286

[8] Boyer M M, Filion D. Common and fundamental factors in stock returns of Canadian oil and gas companies. Energy Economics, 2007, 29(3): 428–453

[9] Ramos S B, Veiga H. Risk factors in oil and gas industry returns: international evidence. Energy Economics, 2011, 33(3): 525–542

[10] Dayanandan A, Donker H. Oil prices and accounting profits of oil and gas companies. International Review of Financial Analysis, 2011, 20(5): 252–257

[11] Sadorsky P. Assessing the impact of oil prices on firms of different sizes: its tough being in the middle. Energy Policy, 2008, 36(10): 3854–3861

[12] Doğrul H G, Soytas U. Relationship between oil prices, interest rate, and unemployment: evidence from an emerging market. Energy Economics, 2010, 32(6): 1523–1528

[13] Faff R W, Brailsford T J. Oil price risk and the Australian stock market. Journal of Energy Finance & Development, 1999, 4(1): 69–87

[14] Buhl H U, Strauβ S, Wiesent J. The impact of commodity price risk management on the profits of a company. Resources Policy, 2011, 36(4): 346–353

[15] Mohanty S, Nandha M, Habis E, Juhabi E. Oil price risk exposure: the case of the U.S. Travel and Leisure Industry. Energy Economics, 2014, 41: 117–124

[16] Ye D, Liu S, Kong D. Do efforts on energy saving enhance firm values? Evidence from China’s stock market. Energy Economics, 2013, 40: 360–369

[17] Elyasiani E, Mansur I, Odusami B. Oil price shocks and industry stock returns. Energy Economics, 2011, 33(5): 966–974

[18] Phan D, Nguyen H, Faff R. Uncovering the asymmetric linkage between financial derivatives and firm value: the case of oil and gas exploration and production companies. Energy Economics, 2014, 45: 340–352

[19] Jin Y, Jorion P. Firm value and hedging: evidence from U.S. oil and gas producers. Journal of Finance, 2006, 61(2): 893–919

[20] Cameron K, Schnusenberg O. Oil prices, SUVs, and Iraq: an investigation of automobile manufacturer oil price sensitivity. Energy Economics, 2009, 31(3): 375–381

[21] Aggarwal R, Akhigbe A, Mohanty S K. Oil price shocks and transportation firm asset prices. Energy Economics, 2012, 34(5): 1370–1379

[22] Tsai C L. The high-frequency asymmetric response of stock returns to monetary policy for high oil price events. Energy Economics, 2013, 36: 166–176

[23] Aye G C, Dadam V, Gupta R, Mamba B. Oil price uncertainty and manufacturing production. Energy Economics, 2014, 43: 41–47

[24] Narayan P K, Sharma S S. New evidence on oil price and firm returns. Journal of Banking & Finance, 2011, 35(12): 3253–3262

[25] Jiménez-Rodríguez R. The impact of oil price shocks: evidence from the industries of six OECD countries. Energy Economics, 2008, 30(6): 3095–3108

[26] Basher S A, Sadorsky P. Oil price risk and emerging stock markets. Global Finance Journal, 2006, 17(2): 224–251

[27] Dossogne S. Valorisation and Cession of Firms from Intension to Finalization: From Value to Price. 2nd ed. Wallonia, Belgium, 2006, 227

[28] Habib M A, Ljungqvist A. Firm value and managerial incentives: a stochastic frontier approach michael. 2015–01–12

[29] Oxelheim L, Randoy T. The impact of foreign board membership on firm value. Journal of Banking & Finance, 2003, 27(12): 2369–2392

[30] Wattanatorn W, Kanchanapoom T. Oil prices and profitability performance: sector analysis. Procedia: Social and Behavioral Sciences, 2012, 40: 763–767

[31] Lee B, Yang C W, Huang B. Oil price movements and stock markets revisited: a case of sector stock price indexes in the G-7 countries. Energy Economics, 2012, 34(5): 1284–1300

[32] Vickery J. How and why do small firms manage interest rate risk? Journal of Financial Economics, 2008, 87(2): 446–470

[33] Chen M Y. Adjustments in managerial ownership and changes in firm value. International Review of Economics & Finance, 2013, 25: 1–12

[34] Henriques I, Sadorsky P. The effect of oil price volatility on strategic investment. Energy Economics, 2011, 33(1): 79–87

[35] Ratti R A, Seol Y, Yoon K H. Relative energy price and investment by European firms. Energy Economics, 2011, 33(5): 721–731

[36] Yoon K H, Ratti R A. Energy price uncertainty, energy intensity and firm investment. Energy Economics, 2011, 33(1): 67–78

[37] Mak Y T, Kusnadi Y. Size really matters: further evidence on the negative relationship between board size and firm value. Pacific-Basin Finance Journal, 2005, 13(3): 301–318

[38] Eisenberg T, Sundgren S, Wells M T. Larger board size and decreasing firm value in small firms. Journal of Financial Economics, 1998, 48(1): 35–54

[39] Coles J L, Daniel N D, Naveen L. Boards: Does one size fit all? Journal of Financial Economics, 2008, 87(2): 329–356

[40] Baccar A, Ben Mohamed E, Bouri A. Managerial optimism, overconfidence and board characteristics: towards a new role of corporate governance. Australian Journal of Basic and Applied Sciences, 2013, 7(7): 287–301

[41] Ben Mohamed E, Baccar A, Fairchild R, Bouri A. Does corporate governance affect managerial optimism: evidence from NYSE panel data firms. International Journal of Euro-Mediterranean Studies, 2012, 5(1): 41–56

[42] Ben Mohamed E, Fairchild R, Bouri A. Investment cash flow sensitivity under managerial optimism: new evidence from NYSE panel data firms. Journal of Economics Finance and Administrative Sciences, 2014, 19(36): 11–18

[43] Kumbhakar S C, Lovell C A K. Stochastic frontier analysis. Journal of Banking & Finance, 2000, 36: 1311–1319

[44] Bhaumik S K, Das P K, Kumbhakar S C. A stochastic frontier approach to modelling financial constraints in firms: an application to India. Journal of Banking & Finance, 2012, 36(5): 1311–1319

[45] Aigner D, Lovell C A K, Schmidt P. Formulation and estimation of stochastic frontier production function models. Journal of Econometrics, 1977, 6(1): 21–37

[46] Pawlina G, Renneboog L. Is investment-cash flow sensitivity caused by the agency costs or asymmetric information? Evidence from the UK. European Financial Management, 2005, 11(4): 483–513

[47] Ben Mohamed E, Jarboui S, Baccar A, Bouri A. On the effect of CEOs’ personal characteristics in transport firm value? A stochastic frontier model. Case Studies on Transport Policy, 2015, 3(2): 1–6

[48] Oxelheim L, Randøy T. The impact of foreign board membership on firm value. Journal of Banking & Finance, 2003, 27(12): 2369–2392

[49] Bhagat S, Bolton B. Corporate governance and firm performance. Journal of Corporate Finance, 2008, 14(3): 257–273

[50] Kouwenberg R. Does voluntary corporate governance code adoption increase firm value in emerging markets? Evidence from Thailand. 2006–11–30

RIGHTS & PERMISSIONS

2016 Higher Education Press and Springer-Verlag Berlin Heidelberg