DETERMINANTS OF SHARE PRICE IN THE OIL & EXPLORATION

Abstract

This dissertation analyses the primary factors affecting the stock prices of oil and gas exploration firms quoted on the Pakistan Stock Exchange (PSX) during the period 2015 to 2023. This study employed a quantitative research approach based on positivist philosophy, analysing the firm data of four major companies, OGDC, PPL, MARI, and POL, along with their macroeconomic data, which consisted of crude oil prices, interest rates, and exchange rates.

Using EViews for panel data econometrics, the research performed unit root tests, correlation tests, and regression analyses to determine the impact of internal and external factors on the stock price. The results indicate that the Return on Equity (ROE) is the key determinant with the strongest relationship with the share price, while oil price and interest rate as macroeconomic factors remain non-significant. This reflects that unit-level profitability measures have a greater impact on commanding investor attention relative to other parts of the economy in Pakistan’s energy sector.

As discussed above, these findings are pertinent to both corporate decision makers and policy officials. Investors are guided to focus on profitability ratios especially ROE as these enhance selection criteria for stock investment. On the other hand, policymakers are cautioned by the findings against employing macro-level instruments for impacting firm value in capped market contexts.

The research stated in this document suggests that in the context of Pakistan's oil and exploration industry, it is the internal financial efficiency and not the changes in macroeconomics which is the main factor affecting the share price performance.