Page 61 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.72, # 1, 2015, pp. 61-94

VALUE CREATION THROUGH MERGERS AND ACQUISITIONS IN
ENERGY SECTOR

Nigar Vidadi Abdullayeva
Lecturer, MBA Departament

e-mail: [email protected]
Abstract

In today's challenging business environment, companies need to grow to be

competitive on the market. Mergers and acquisitions (M&A) remains a key growth

strategy for companies. This research is focused on examination of short term wealth

effects of mergers and acquisitions (M&A) on shareholders. The aim of the study

was to find out if M&A have any effect on financial performance of participating

companies. The event study methodology was applied to investigate 100 deals in

energy sector, particularly in oil and gas industry engaged in M&A activity from

2000 to 2014. The results of the study confirm that target companies gain

shareholder wealth by exhibiting significantly positive cumulative abnormal returns.

Interestingly, obtained results showed negative impact of M&A announcement on

acquirer‘s stock performance. Findings are in line with previous studies of Andrade

et al. (2001), Bradley et al. (1988), and Jensen and Ruback (1983).

Keywords: Mergers and acquisitions (M&A), energy sector, oil and gas, business

environment, shareholders.
JEL Classification Codes: G34, G39

1. Introduction

In today‘s competitive world, companies face harsh competition to maintain their

market share. Globalization and innovation made it easier for new entrants, which

61