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

Canan Yildirim and Dieter Vanwalleghem
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Canan Yildirim: ESC [Rennes] - ESC Rennes School of Business
Dieter Vanwalleghem: ESC [Rennes] - ESC Rennes School of Business

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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

Keywords: Oil and gas industry; environmental policy strictness; Mergers and acquisitions; Event study (search for similar items in EconPapers)
Date: 2025-01-11
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Published in Energy Journal, 2025, 46 (3), pp.217-241. ⟨10.1177/01956574241307949⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05074520

DOI: 10.1177/01956574241307949

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