Company-specific characteristics affecting oil and gas reserves disclosure in the United Kingdom

Abstract

This paper investigates company-specific characteristics affecting oil and gas reserves disclosure in the United Kingdom. Using a sample selected through purposive and stratified random sampling from 83 UK oil and gas exploration and production companies listed on the London Stock Exchange (LSE) the paper helped to shed light on this critical disclosure issue. The results provide evidence that company's characteristics of firm size, size of auditor, debt capital and listing status significantly affect the extent of disclosure of oil and gas reserves information, while stage of firm operation was not found significant. Furthermore, the need to reduce the agency cost of information asymmetry and moral hazard, and thus reduce contracting and monitoring cost, as well to signal prospects to stakeholders as determined by the firm size, use of debt capital, size of auditor, and listing status, will compel companies to disclose oil and gas reserves even where such disclosure is discretionary as is the case in the UK. The findings are relevant to analysts and investors who use oil and gas reserve data disclosed by companies in valuing firms. Of interest to them would be information on reserves quantity data and narratives provided in the website in contradistinction to the valuation based on the annual report alone.