Share price volatility and financial performance: The empirical study of multinational oil and gas companies

Abstract

The goal of this research is to examine the relationship between share price changes and some financial performance indicators such as long-term debt, dividend policy, growth in assets etc. for multinational oil and gas companies listed on New York Stock Exchange. It has been found that there is a positive relationship between payout ratio, long-term debt and share price volatility and negative relationship between growth in changes in assets, firm’s capitalization and share price volatility. Therefore it has been shown that these financial indicators explain share price volatility for oil and gas companies listed on New York Stock Exchange. The results of this research might be used by managers, analysts investors and others for predicting share price volatility when oil and gas companies disclose information about their financial performance indicators. Mostly it shows the relevance of the dividend policy on stock price changes for companies listed on NYSE. An obvious implication of the theoretical model is that econometric formulations of the relationships between share price volatility and other financial performance indicators are likely to be unstable and of limited use for making decisions based on it. Therefore if the decisions need to be made using this model, new data should be constantly added to the model and some additional factors may need to be added to the model. The need for financial disclosure and financial reporting overall exists because of agency conflicts between investors and managers, and because of information asymmetry among agents.