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Shifting sentiments in firm investment: an application to the oil industry

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  • Klaus Mohn
  • Bård Misund

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.

Suggested Citation

  • Klaus Mohn & Bård Misund, 2011. "Shifting sentiments in firm investment: an application to the oil industry," Applied Financial Economics, Taylor & Francis Journals, vol. 21(7), pages 469-479.
  • Handle: RePEc:taf:apfiec:v:21:y:2011:i:7:p:469-479
    DOI: 10.1080/09603107.2010.534060
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    Cited by:

    1. Aune, Finn Roar & Mohn, Klaus & Osmundsen, Petter & Rosendahl, Knut Einar, 2010. "Financial market pressure, tacit collusion and oil price formation," Energy Economics, Elsevier, vol. 32(2), pages 389-398, March.
    2. 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.

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources

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