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The Asymmetric Response of Mergers and Acquisitions in the North American Oil and Gas Industry to Oil Price Changes

Author

Listed:
  • Jungseok Park

    (Department of Energy Resources Engineering, College of Engineering, Seoul National University, KOREA)

  • Jungho Baek

    (Department of Economics, School of Management, University of Alaska Fairbanks, U.S.A.)

Abstract

This article examines the effects that oil price changes have on oil and gas industry M&A activities in North America. To investigate this topic thoroughly, unlike early studies we take specific account of the asymmetric effects of oil price changes in our modeling procedure, using the nonlinear autogressive distributed lag (ARDL) model of Shin, Yu and Greenwood-Nimmo. The results provide strong evidence that changes in oil prices have asymmetric effects on oil and gas industry M&A activities in both the short-run and long-run. More importantly, oil and gas industry M&A activities appear to respond more to oil price decreases than to increases.

Suggested Citation

  • Jungseok Park & Jungho Baek, 2019. "The Asymmetric Response of Mergers and Acquisitions in the North American Oil and Gas Industry to Oil Price Changes," Review of Economics & Finance, Better Advances Press, Canada, vol. 15, pages 23-30, February.
    • Handle: RePEc:bap:journl:190103
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    References listed on IDEAS

    as
    1. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    2. 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.
    3. Manuel Monge & Luís Alberiko Gil-Alana, 2016. "Fractional integration and cointegration in merger and acquisitions in the US petroleum industry," Applied Economics Letters, Taylor & Francis Journals, vol. 23(10), pages 701-704, July.
    4. Robin C. Sickles & William C. Horrace (ed.), 2014. "Festschrift in Honor of Peter Schmidt," Springer Books, Springer, edition 127, number 978-1-4899-8008-3, December.
    5. Hsu, Kuang-Chung & Wright, Michael & Zhu, Zhen, 2017. "What motivates merger and acquisition activities in the upstream oil & gas sectors in the U.S.?," Energy Economics, Elsevier, vol. 65(C), pages 240-250.
    6. Reddy, K.S. & Xie, En, 2017. "Cross-border mergers and acquisitions by oil and gas multinational enterprises: Geography-based view of energy strategy," Renewable and Sustainable Energy Reviews, Elsevier, vol. 72(C), pages 961-980.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Asymmetry; Mergers and acquisitions (M&A); Nonlinear ARDL; North America; Oil prices;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L70 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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