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Corporate takeovers in the US oil and gas sector

Author

Listed:
  • Alex Ng

    (Thompson Rivers University, Associate Professor of Finance, British Columbia, Canada.)

  • Raymond A. K. Cox

    (Thompson Rivers University, Chair and Professor of Finance, Department of Accounting & Finance, British Columbia, Canada.)

Abstract

We examine corporate takeovers in the U.S. oil and gas sector from 1990 to 2008. We test the hypotheses that energy prices and reserves influence takeovers in the energy market for corporate control. We employ these methods: 1. capital asset pricing model, 2. regression analysis, and 3. Granger causality test. Our results show that oil reserves cause takeover deals and affect the value of the merger. High oil prices propel management to acquire oil firms as well as affect the target value. However, the reverse cause-effect mechanism occurs for natural gas prices. That is, takeover activity causes gas prices to decrease. Acquirers are motivated to purchase reserves; whereas, targets are disposed to sell based on energy prices. Hence, our findings imply that countries can consider policies, which address the motivations of the oil and gas industries to facilitate well-functioning takeover markets.

Suggested Citation

  • 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.
    • Handle: RePEc:lrc:lareco:v:4:y:2016:i:1:p:23-34
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Mergers and acquisitions; Oil and gas; Reserves energy; Takeovers.;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • 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
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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