Operational efficiency and returns of oil and gas company shares: evidence from Moscow exchange

Abstract

Importance: functioning as a cornerstone of the financial system, the stock market facilitates investment and economic growth, making it a focal point of Russian development policy. In the current economic landscape, Russian public policy is strategically focused on the development of this financial market segment. The oil and gas sector, representing roughly 46% of total market capitalization, is a dominant force on the Russian equity market. Purpose: this study investigates the impact of operating efficiency in oil and gas companies on the returns of their common stock. Research design: the research design tests hypotheses on the explanatory and predictive power of corporate efficiency metrics. The central methodological framework for this analysis is the two-step Fama-MacBeth procedure. The study utilizes data from January 2015 to December 2023. Results: the findings provide evidence that corporate performance metrics significantly influence the excess returns of Russian oil and gas stocks. The authors conclude that these performance indicators possess explanatory power for contemporaneous returns and predictive power for future stock returns.