Abstract ABSTRACT: This study examines the potential information content of oil and gas reserve value disclosure requirements mandated by the SEC in 1979 by examining whether the reserve value disclosures based on Reserve Recognition Accounting (RRA) are obtainable from transformation of other concurrently available non-RRA data. This can be interpreted as a "necessary condition" approach to studying potential information content in general. Three increasingly complex specifications of an expectation model were developed. All identifiable RRA signals were excluded from their information sets. Association between the resulting model estimates based on non-RRA data and reported reserve values based on RRA was studied using a sample of about 160 firms. The strong linear relationships uncovered imply that RRA signals may, have potentially low incremental information content in the sense that they may not have much incremental impact on observed security prices. Prediction errors at the firm level were often large, implying usefulness of RRA data in Other contexts.
Bala G. Dharan (Sun,) studied this question.