Background: This study addressed the critical intersection of accounting standards and investor returns within Africa's oil and gas sector. Specifically, it investigated how diverse accounting treatments under International Financial Reporting Standards 6 (IFRS 6) for exploration and evaluation costs, including capitalization, depreciation methods, and disclosure, affect investor returns. Utilizing panel data and regression analysis, this study examined the nuanced impact of these accounting choices on key financial performance indicators, offering insights into the complex relationship between IFRS 6 implementation and investor confidence in the African context.

Aim: This study examined the impact of International Financial Reporting Standards 6 (IFRS 6) exploration and evaluation accounting choices on investor returns in African firms.

Methodology: This study examined the impact of IFRS 6 accounting choices on investor returns in African oil and gas firms. This study used an ex post facto design and purposive sampling; panel data from 9 listed companies was analyzed using panel regression techniques. The regression techniques investigated the relationship between IFRS 6 accounting choices (capitalization, depreciation, disclosure, and impairment) and investor return measures such as share price, Tobin's Q, return on equity, and return on sales. The sample consists of 9 oil and gas companies listed on stock exchanges within Africa, with representation from key oil-producing nations such as Nigeria, Ghana, and others.

Findings: The findings revealed that IFRS 6 positively and significantly affects debt service capacity, highlighting that compliance with the standard enhances financial credibility and enables firms to meet their debt obligations more effectively, a critical factor for improving investor confidence. However, the study also identified a negative and significant relationship between IFRS 6 and profitability metrics such as return on equity (ROE) and return on sales (ROS). While the recognition of exploration and evaluation expenses enhances perceived asset values, it simultaneously reduces profitability metrics, suggesting the high upfront costs associated with these activities weigh heavily on short-term returns. Furthermore, the findings showed positive but statistically insignificant relationships between IFRS 6 and share price, dividend payout, and debt capital raised, as well as a negative but insignificant effect on equity capital raised. These results emphasize the complex interplay between IFRS 6 adoption and financial performance, indicating that while transparency improves, profitability and market outcomes do not uniformly benefit from the standard's implementation.

Contributions: This study contributes to the existing literature by providing empirical evidence on the impact of IFRS 6 exploration and evaluation accounting choices on investor returns in the African context. The findings challenge some prevailing assumptions, particularly regarding the positive relationship between capitalized exploration costs and investor returns. By demonstrating the nuanced and sometimes contradictory effects of different IFRS 6 accounting choices on various financial metrics, this research provides valuable insights for academics, practitioners, and policymakers.

Recommendations: It is recommended that African firms in the extractive sector enhance their communication strategies to effectively convey the long-term benefits of exploration activities to investors. Transparent and comprehensive disclosure of exploration and evaluation activities, aligned with IFRS 6 requirements, is crucial for building investor confidence and mitigating concerns related to declining short-term profitability. Furthermore, regulators should consider promoting best practices in IFRS 6 implementation and encourage firms to adopt robust internal controls for exploration and evaluation activities.

Implications for Africa: This study has several significant implications. Theoretically, it contributes to the literature on the impact of accounting standards on investor behavior and market outcomes. By examining the specific case of IFRS 6 in the African context, the study challenges some prevailing assumptions about the relationship between accounting choices and investor returns. Practically, the findings highlight the importance of effective communication strategies for African oil and gas companies to convey the long-term value of exploration and evaluation activities to investors. These insights can inform corporate decision-making regarding exploration and evaluation strategies and accounting policies. For policymakers, the study emphasized the need for clear and consistent implementation of IFRS 6 within the African context, along with supportive regulatory frameworks to encourage best practices in financial reporting.

Researchers: Further researchers should explore the impact of IFRS 6 on investor returns in other African subregions or countries, considering factors like economic development, regulatory environment, and investor sophistication. Investigating the long-term impact of IFRS 6 on investor behavior and market outcomes would also be valuable. Additionally, exploring the role of corporate governance, disclosure quality, and analyst coverage in mediating the relationship between IFRS 6 and investor returns could provide deeper insights.