Oil prices and accounting profits of oil and gas companies

This paper investigates the relationship between commodity prices of crude oil, capital structure, firm size and accounting measures of firm performance using a sample of oil and gas firms from 1990 to 2008. We employ estimates based on panel least squares, a fixed effects model and a random effects model. We also use generalized method of moments (GMM) estimators by Arellano and Bond (1991) and Blundell and Bond (1998, 2000). Our findings show that crude oil prices positively and significantly impact the performance of oil and gas firms in North America using accounting measures of performance. The recent financial crisis of 2007 and 2008 negatively influenced oil prices and the financial performance of oil and gas firms. On the other hand, the earlier global crises (Asian financial crisis and 9/11) did not have a significant impact on the return on equity of oil and gas companies. Our primary contribution to the literature is a comprehensive and econometric analysis of the relation between commodity prices and accounting measures of performance oil and gas companies. (C) 2011 Elsevier Inc. All rights reserved.