Reflection of Regulatory Announcement in Equity Market: Fresh Insight from Oil & Gas Sector of Pakistan

Abstract

This study is based on the problem that how regulations made by oil and gas regulatory authority influences the companies in oil and gas sector of Pakistan. We identify 13 regulatory changes in oil and sector of Pakistan which broadly includes the announcement related to the formulation, functions and responsibilities of oil and gas authority, deregulation and changes in the prices of oil and gas products, interference of apex court into the oil and gas sector and privatization of oil refineries in emerging market of Pakistan. Well-liked event study methodology is used to uncover the impact of regulation announcement on equity prices in Pakistan. Beside this, we also capture the effect of regulation announcement on the firm performance by introducing the dummy variable in ordinary least framework. In line with the financial and econometric theory criteria, we use the sales growth, leverage, liquidity and tangibility as control variables. Study reveal that regulatory announcements have statistically significant aggregate effect on the oil and gas sector of Pakistan stock exchange. We recommend to the policy makers, managers and regulators that the stock prices of oil and gas companies are more sensitive toward the regulatory announcements related to interference of Supreme Court and regulations concerning to the formulation, functions and responsibilities of oil and gas regulatory authority in Pakistan.