Are mergers and acquisitions in the petroleum industry affected by oil prices?

ABSTRACT

This paper contributes to the literature on crude oil price behavior and examines how this affects mergers and acquisitions (M&A) in the petroleum industry in the US. The paper analyzes the relationship of these two series by studying its dynamic in the time–frequency domain. The novelty of this study’s approach lies in the application of wavelet tools for its resolution. Monthly data are used in this study, covering the period January 1980–June 2012. It was observed that there was a shift to higher frequencies of the wavelet coherency during the mid-1990s and the late 2000s. The results also indicate that during the mid-1990s and the late-2000s, an increase in M&A took place that was led by the increase in West Texas Intermediate crude oil prices.

Keywords:

• Mergers and acquisitions
• oil prices
• wavelet analysis

Funding

Fernando Perez de Gracia acknowledges financial support from the Spanish Ministry of Economics and Competitiveness through project ECO-2014-55496R.

Notes

¹ Hogan and Lakey (2005) worked about the comparison between time-frequency and time-scale (wavelets) methods.

² The database was obtained from Dow Jones & Company, Spot Oil Price: West Texas Intermediate (DISCONTINUED SERIES)© [OILPRICE], retrieved from FRED, Federal Reserve Bank of St. Louis. https://research.stlouisfed.org/fred2/series/OILPRICE/, September 8, 2015.

³ Coherency ranges from blue (low coherency) to red (high coherency). The cone of influence is shown with a thick line, which is the region subject to border distortions.

Additional information

Funding

Fernando Perez de Gracia acknowledges financial support from the Spanish Ministry of Economics and Competitiveness through project ECO-2014-55496R.