An Examination of the Association Between Accounting and Share Price Data in the Extractive Petroleum Industry: A Reply.

Abstract In their comment, Professors Daniel W. Collins and Melvin C. O'Connor have criticized some portions of the conceptual and methodological development of the author's earlier work. The purpose of this reply is to respond to their criticisms and to extend slightly one portion of his original work. This reply is organized into two sections, conceptual and methodological, that parallel the organization of the Collins and O'Connor comment. Collins and O'Connor question whether the primary null hypothesis of the author's study is consistent with the methodology used. Specifically, they contend that the primary null hypothesis should have been stated in terms of information content. The attributes of the sample and the effect of the choice of accounting method on the accounting risk measures are examined in the methodological section of this reply. One of the major points in the Collins and O'Connor analysis is the separation of the sample into producing and integrated oil firms. On the basis of their resuits, they conclude that none of the associations between the accounting risk measures for the field cost producing firms and beta are significant, but that nearly all are significant for the integrated sample for both the full and field cost groups.