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The Impact of Vertical Integration and Horizontal Diversification on the Value of Energy Firms

In: The Econometrics of Energy Systems

Author

Listed:
  • Carlo Pozzi
  • Philippe Vassilopoulos

Abstract

We analyse the long-run return performance of 27 value-weighted equity portfolios based on a classification of the US energy sector that follows traditional industrial organization categories. When adjusted to market and fuel risks, portfolio returns show that both vertical integration and horizontal diversification failed to produce shareholder value during the 1990–2003 period. This confirms the theoretical predictions of both financial economics and industrial organization and shows that the wave of corporate restructuring that has interested US energy industries over the last decade may have occurred at a net cost to firm shareholders.

Suggested Citation

  • Carlo Pozzi & Philippe Vassilopoulos, 2007. "The Impact of Vertical Integration and Horizontal Diversification on the Value of Energy Firms," Palgrave Macmillan Books, in: Jan Horst Keppler & Régis Bourbonnais & Jacques Girod (ed.), The Econometrics of Energy Systems, chapter 11, pages 225-253, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-62631-7_11
    DOI: 10.1057/9780230626317_11
    as

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