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Effectiveness of the Extractive Industries Transparency Initiative

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thesis
posted on 23.11.2021, 20:09 by Olayinka MosesOlayinka Moses

I investigate two aspects of the Extractive Industries Transparency Initiative (EITI). The first issue is the effectiveness of the EITI in mitigating corruption in EITI implementing countries. The second issue is the economic value of extractive companies’ information disclosed under the EITI implementation regime.  I address the first issue by examining the influence of EITI implementation experience on the perceived control of corruption in EITI implementing countries. Specifically, I address two questions (i) whether EITI implementation experience is associated with improved control of corruption for all implementing countries taken together, and (ii) whether the effect of EITI implementation experience on the perceived level of corruption varies across implementing countries. Based on the sampled 51 implementing countries over the period 2003-2015, I find that across-the-board, EITI implementation experience is not associated with improved control of corruption. The findings show that the interaction term for EITI implementation experience with Sub-Saharan African countries is positively associated with improved control of corruption. Thus, the negative effect associated with EITI implementation experience is less for Sub-Saharan African countries.  I address the second issue by investigating the economic value of extractive companies’ exploration payments information disclosed under the EITI implementation process. Using the United States Extractive Industries Transparency Initiative (USEITI), I examine the impact of disclosure of non-tax payments by extractive companies to the US government, as an illustration of the economic value of information disclosed as a result of the EITI. I address two research questions (i) whether investors react to the initial disclosure of the USEITI information and hence whether the information is of value to investors, and (ii) the value relevance of this information over the whole period for which this information has been available. The issue employs two separate but related methods to examine these questions. First, it employs a standard event study methodology, to test for trading volume and price reaction, around the event date of the first-time release of this information. Second, it employs the Collins, Pincus, and Xie, (1999) adaptation of the Ohlson (1995) model to examine the value relevance of USEITI information disclosure over the period 2013-2016. The results show that the USEITI disclosure evoked both trading volume and price reactions, thus suggesting that the disclosure of extractive payments had information content relevant to price setting. The price reaction, as evidenced in the cross-sectional regression, is associated with oil and gas firms, and the working capital and asset turnover of the sample extractive companies. The results also indicate that the continuing disclosure of the USEITI information was value relevant.  Taken together, the findings from the thesis suggest that the EITI has been relatively effective in lessening the level of perceived corruption in the countries in dire need of reform and more importantly, the information released under the EITI implementation regime has economic value both at initial release and subsequent continued release. Thus, policymakers and managers of companies operating in countries rich in natural resources need to take note of the impact of EITI implementation.

History

Copyright Date

01/01/2018

Date of Award

01/01/2018

Publisher

Te Herenga Waka—Victoria University of Wellington

Rights License

Author Retains Copyright

Degree Discipline

Accounting

Degree Grantor

Te Herenga Waka—Victoria University of Wellington

Degree Level

Doctoral

Degree Name

Doctor of Philosophy

ANZSRC Type Of Activity code

970115 Expanding Knowledge in Commerce, Management, Tourism and Services

Victoria University of Wellington Item Type

Awarded Doctoral Thesis

Language

en_NZ

Victoria University of Wellington School

School of Accounting and Commercial Law

Advisors

Van Zijl, Tony; Houqe, Noor