A differential effect of energy instability on share price and income statement

Abstract

This paper evaluated the differential effect of energy instability on the share price and income statement performance of companies in South Africa during the energy supply instability (loading shedding period) and during the energy supply stability period. Data was collected from the Fusion Media investment archives (for JSE share price of companies), and from STATS SA (for aggregate income statement of all South African industries). The data was analysed by applying the paired sample T-test for mean difference. At an alpha value of 0.05, the results indicate that share price of companies in the JSE during the period of energy stability significantly exceeds the share prices during periods of energy instability at a p-value of 0.0001, far below the alpha level. In addition, the results on the income statement differential analysis show that income statement (turnover and income) during the period of energy stability significantly exceeds the turnover and income during periods of energy instability at a p-value of 0.0001, which is below the alpha level of 0.05. The practical implication thus signifies the importance of energy stability in bolstering the market value, the turnover and income of industries in South Africa. This also shows that energy instability might be a problem for accounting valuation analysis given the income statement variations due to energy instability. The paper provides further research agenda to examine this phenomenon in other regions of Africa where industries face severe energy shortage and to examine the implication on corporate accounting valuation.