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Firm Value Impact of Global Oil and Gas Mergers and Acquisitions: The Role of Environmental Policy Framework

Author

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  • Canan Yildirim
  • Dieter Vanwalleghem

Abstract

The oil and gas (O&G) industry is under increasing pressure to decarbonize and adopt sustainable practices. While some firms are transitioning toward renewable energy, many continue to expand their traditional O&G operations. This study examines how financial markets perceive the value creation potential of business-as-usual mergers and acquisitions (M&As) by the world’s largest O&G companies from 2000 to 2021. Using an event study methodology, we focus on the role of home-country environmental policy stringency (EPS) in shaping market reactions. Our findings reveal that higher EPS in the acquirer’s home country is associated with a greater perceived loss in shareholder value upon the announcement of traditional O&G M&A deals, suggesting that EPS signals significant operational and financial risks related to hydrocarbon investments. However, when these deals are cross-border, the adverse impact of the acquirer’s home-market EPS diminishes, indicating that expanding beyond domestic markets may help O&G firms mitigate the financial consequences of stricter environmental regulations. JEL Classification: G11, G14, G34, Q40, Q58

Suggested Citation

  • Canan Yildirim & Dieter Vanwalleghem, 2025. "Firm Value Impact of Global Oil and Gas Mergers and Acquisitions: The Role of Environmental Policy Framework," The Energy Journal, , vol. 46(3), pages 217-241, May.
    • Handle: RePEc:sae:enejou:v:46:y:2025:i:3:p:217-241
    DOI: 10.1177/01956574241307949
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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