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Purchasing reserves and commodity market timing as takeover motives in the oil and gas industry

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  • Ng, Alex
  • Donker, Han

Abstract

Can broad factors such as natural resources endowment and global commodity markets influence corporate takeovers? This paper theorizes that managers are motivated in mergers and acquisitions to purchase energy reserves and to time the commodity market in the oil and gas industry. We find supportive evidence that shows that energy reserves and prices cause and affect takeover activity, value, and performance. Acquirers are motivated to purchase reserves, while targets are motivated to sell based on market timing. Acquirers have negative takeover performance from lower risk. Our conclusions are robust to the traditional explanations: equity valuation, synergy, free cash flow, equity and debt market conditions, and economic cycles.

Suggested Citation

  • Ng, Alex & Donker, Han, 2013. "Purchasing reserves and commodity market timing as takeover motives in the oil and gas industry," Energy Economics, Elsevier, vol. 37(C), pages 167-181.
  • Handle: RePEc:eee:eneeco:v:37:y:2013:i:c:p:167-181
    DOI: 10.1016/j.eneco.2013.01.010
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alex Ng & Raymond A. K. Cox, 2016. "Corporate takeovers in the US oil and gas sector," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 4(1), pages 23-34, February.
    2. repec:eee:eneeco:v:70:y:2018:i:c:p:190-204 is not listed on IDEAS
    3. Sabet, Amir H. & Heaney, Richard, 2016. "An event study analysis of oil and gas firm acreage and reserve acquisitions," Energy Economics, Elsevier, vol. 57(C), pages 215-227.
    4. repec:eee:eneeco:v:65:y:2017:i:c:p:240-250 is not listed on IDEAS
    5. Sabet, Amir H. & Heaney, Richard, 2015. "Bid-ask spread, information asymmetry and acquisition of oil and gas assets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 37(C), pages 77-84.
    6. Reddy, Kotapati Srinivasa, 2015. "Why do Cross-border Merger/Acquisition Deals become Delayed, or Unsuccessful? – A Cross-Case Analysis in the Dynamic Industries," MPRA Paper 63940, University Library of Munich, Germany, revised 2015.
    7. Reddy, K.S. & Xie, En, 2017. "Cross-border mergers and acquisitions by oil and gas multinational enterprises: Geography-based view of energy strategy," Renewable and Sustainable Energy Reviews, Elsevier, vol. 72(C), pages 961-980.
    8. repec:eee:eneeco:v:69:y:2018:i:c:p:155-169 is not listed on IDEAS

    More about this item

    Keywords

    Takeovers; Mergers & acquisitions; Oil and gas industry; Oil reserves; Energy;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General

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