Purchasing reserves and commodity market timing as takeover motives in the oil and gas industry
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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Walid Ben-Amar & Paul André, 2006. "Separation of Ownership from Control and Acquiring Firm Performance: The Case of Family Ownership in Canada," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(3-4), pages 517-543.
- Rajdeep Singh, 1995.
"Takeover Bidding with Toeholds: The Case of the Owner's Curse,"
- Singh, Rajdeep, 1998. "Takeover Bidding with Toeholds: The Case of the Owner's Curse," Review of Financial Studies, Society for Financial Studies, vol. 11(4), pages 679-704.
- Fishman, Michael J, 1989. " Preemptive Bidding and the Role of the Medium of Exchange in Acquisitions," Journal of Finance, American Finance Association, vol. 44(1), pages 41-57, March.
- Kevin T. Berry & Charlotte J. Wright, 2001. "The Value Relevance of Oil and Gas Disclosures: An Assessment of the Market's Perception of Firms' Effort and Ability to Discover Reserves," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(5-6), pages 741-769.
- Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
- laurent granier & Marion Podesta, 2010.
"Bundling and Mergers in Energy Markets,"
- MING DONG & David Hirshleifer & SCOTT RICHARSON & Siew Hong Teoh, 2004.
"Does Investor Misvaluation Drive the Takeover Market?,"
- Ming Dong & David Hirshleifer & Scott Richardson & Siew Hong Teoh, 2006. "Does Investor Misvaluation Drive the Takeover Market?," Journal of Finance, American Finance Association, vol. 61(2), pages 725-762, 04.
- Jeffrey A. Wurgler & Malcolm P. Baker, 2001.
"Market Timing and Capital Structure,"
Yale School of Management Working Papers
ysm181, Yale School of Management.
- Blose, Laurence E. & Shieh, Joseph C. P., 1995. "The impact of gold price on the value of gold mining stock," Review of Financial Economics, Elsevier, vol. 4(2), pages 125-139.
- Eckbo, B. Espen & Thorburn, Karin S., 2000. "Gains to Bidder Firms Revisited: Domestic and Foreign Acquisitions in Canada," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(01), pages 1-25, March.
- Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
- Siew Hong Teoh & Ivo Welch & T.J. Wong, 1998. "Earnings Management and the Long-Run Market Performance of Initial Public Offerings," Journal of Finance, American Finance Association, vol. 53(6), pages 1935-1974, December.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Sadorsky, Perry, 2002. "Time-varying risk premiums in petroleum futures prices," Energy Economics, Elsevier, vol. 24(6), pages 539-556, November.
- Michael J. Fishman, 1988. "A Theory of Preemptive Takeover Bidding," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 88-101, Spring.
- Boyer, M. Martin & Filion, Didier, 2007.
"Common and fundamental factors in stock returns of Canadian oil and gas companies,"
Elsevier, vol. 29(3), pages 428-453, May.
- M. Martin Boyer & Didier Filion, 2004. "Common and Fundamental Factors in Stock Returns of Canadian Oil and Gas Companies," CIRANO Working Papers 2004s-62, CIRANO.
- Jarrad Harford, 1999. "Corporate Cash Reserves and Acquisitions," Journal of Finance, American Finance Association, vol. 54(6), pages 1969-1997, December.
- Rhodes-Kropf, Matthew & Robinson, David T. & Viswanathan, S., 2005. "Valuation waves and merger activity: The empirical evidence," Journal of Financial Economics, Elsevier, vol. 77(3), pages 561-603, September.
- Weston, J. Fred & Johnson, Brian A. & Siu, Juan A., 1999. "Mergers and restructuring in the world oil industry," Journal of Energy Finance & Development, Elsevier, vol. 4(2), pages 149-183.
- Andrei Shleifer & Robert W. Vishny, 2001.
"Stock Market Driven Acquisitions,"
NBER Working Papers
8439, National Bureau of Economic Research, Inc.
- Denis, David J. & Sarin, Atulya, 2001. "Is the Market Surprised by Poor Earnings Realizations following Seasoned Equity Offerings?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(02), pages 169-193, June.
- Kretzschmar, Gavin L. & Kirchner, Axel, 2009. "Oil price and reserve location--Effects on oil and gas sector returns," Global Finance Journal, Elsevier, vol. 20(3), pages 260-272.
- Burkart, Mike, 1995. " Initial Shareholdings and Overbidding in Takeover Contests," Journal of Finance, American Finance Association, vol. 50(5), pages 1491-1515, December.
- Steven Freund & Alexandros P. Prezas & Gopala K. Vasudevan, 2003. "Operating Performance and Free Cash Flow of Asset Buyers," Financial Management, Financial Management Association, vol. 32(4), Winter.
- Sadorsky, Perry, 2001. "Risk factors in stock returns of Canadian oil and gas companies," Energy Economics, Elsevier, vol. 23(1), pages 17-28, January.
- Loughran, Tim & Ritter, Jay R, 1997. " The Operating Performance of Firms Conducting Seasoned Equity Offerings," Journal of Finance, American Finance Association, vol. 52(5), pages 1823-50, December.
- Rajan, Raghuram & Servaes, Henri, 1997. " Analyst Following of Initial Public Offerings," Journal of Finance, American Finance Association, vol. 52(2), pages 507-29, June.
- Lang, Larry H. P. & Stulz, ReneM. & Walkling, Ralph A., 1991. "A test of the free cash flow hypothesis*1: The case of bidder returns," Journal of Financial Economics, Elsevier, vol. 29(2), pages 315-335, October.
- Jones, Charles M & Kaul, Gautam, 1996. " Oil and the Stock Markets," Journal of Finance, American Finance Association, vol. 51(2), pages 463-91, June.
- Servaes, Henri, 1994. "Do Takeover Targets Overinvest?," Review of Financial Studies, Society for Financial Studies, vol. 7(2), pages 253-77.
- Martynova, Marina & Renneboog, Luc, 2008. "A century of corporate takeovers: What have we learned and where do we stand?," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2148-2177, October.
When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:37:y:2013:i:c:p:167-181. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.