Oil Price Uncertainty and M&A Activity

Samuel D. Barrows, Magnus Blomkvist, Nebojsa Dimic and Milos Vulanovic

The Energy Journal, 2023, vol. 44, issue 4, 1-20

Abstract: This study examines the impact of oil price uncertainty on mergers and acquisition (M&A) activity in the oil and gas sector. Analyzing this industry enables us to construct a natural forward-looking measure of oil price uncertainty, namely the implied crude oil volatility. Using a sample of U.S. firms in the oil and gas sector from 1994–2018 containing 4,323 announced transactions, we document that oil price uncertainty is negatively related to future M&A activity. Uncertainty is mainly a driver of horizontal and vertical M&A activity, where upstream firms are more affected by this uncertainty than downstream firms. Our results lend support to a real options explanation of investment under uncertainty where firms choose to defer investments as a response to increased uncertainty.

Keywords: Energy economics; M&A; Corporate investment; Implied crude oil volatility; Oil and gas sector; Oil price uncertainty (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.5547/01956574.44.4.sbar (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:44:y:2023:i:4:p:1-20

DOI: 10.5547/01956574.44.4.sbar

Access Statistics for this article

More articles in The Energy Journal
Bibliographic data for series maintained by SAGE Publications ().