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Shifting sentiments in Firm Investment: An Application to the Oil Industry

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  • Mohn, Klaus

    ()
    (University of Stavanger)

  • Misund, Bård

    (University of Stavanger)

Abstract

Recent developments in the oil and gas industry suggest that investment behaviour is not necessarily changeless over time. We propose a micro-econometric procedure to investigate the stability of investment behaviour at the firm level. Applying system Generalized Method of Moments (GMM) on a panel data set for 253 oil and gas companies over 14 years, we estimate accelerator models of investment with error-correction. Robust econometric evidence indicates a structural break in oil and gas investment in 1998. The process of capital formation over the last few years is more flexible than before, with significant and material changes in the role of explanatory factors like cash flow and uncertainty.

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Bibliographic Info

Paper provided by University of Stavanger in its series UiS Working Papers in Economics and Finance with number 2009/12.

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Length: 21 pages
Date of creation: 01 Apr 2008
Date of revision:
Handle: RePEc:hhs:stavef:2009_012

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Postal: University of Stavanger, NO-4036 Stavanger, Norway
Web page: http://www.uis.no/research/economics_and_finance
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Keywords: Capital formation; Structural Break; Dynamic Panel Data models;

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References

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  1. Bronwyn Hall & Jacques Mairesse, 1998. "Firm-Level Investment in France and the United States: An exploration of what we have learned in twenty years," Economics Series Working Papers 1998-W09, University of Oxford, Department of Economics.
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  16. Timothy Erickson & Toni M. Whited, 2000. "Measurement Error and the Relationship between Investment and q," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 1027-1057, October.
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Cited by:
  1. Aune, Finn Roar & Mohn, Klaus & Osmundsen, Petter & Rosendahl, Knut Einar, 2009. "Financial market pressures, tacit collusion and oil price formation," UiS Working Papers in Economics and Finance 2009/14, University of Stavanger.

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