Template-Type: ReDIF-Article 1.0
Author-Name:  Samuel D. Barrows, Magnus Blomkvist, Nebojsa Dimic, and Milos Vulanovic
Title:  Oil Price Uncertainty and M&A Activity
Classification-JEL: F0
Volume:  Volume 44
Issue:  Number 4
Year:  2023
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.
Handle: RePEc:aen:journl:ej44-4-Vulanovic
File-URL: http://www.iaee.org/en/publications/ejarticle.aspx?id=4025
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