Abstract

The study investigates the determinants of mergers and acquisitions in the oil and gas industry over the ten-year period from 2002 to 2011. Our large sample analysis results indicate that in the O&G industry: (1) U.S. acquirers are larger than Canadian acquirers overall; (2) value bidders generate greater abnormal returns relative to glamour bidders in Canadian market; (3) the geographical proximity of headquarters cannot generate pronounced synergies, and even destroys penny stock bidder’s value; and (4) there is no mispricing effect in the penny stocks, but they are more illiquid and have a higher level of idiosyncratic risk. We also examine three cases in 2012-2013 to verify our results and to identify several firm specific factors that are not considered in the large sample analysis. Consistent with our expectations, the Canadian transaction is more straightforward whereas the U.S. transactions depend more on pre-existing connections between the firms and suggest more corporate governance concerns.