Wealth effects of strategic alliances in the resource industry in Australia

Distadio, Luiz Fernando

Wealth effects of strategic alliances in the resource industry in Australia

Distadio, Luiz Fernando

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Publication Type:: Thesis
Issue Date:: 2019

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Field	Value	Language
dc.contributor.author	Distadio, Luiz Fernando
dc.date.accessioned	2020-04-23T22:30:19Z
dc.date.available	2020-04-23T22:30:19Z
dc.date.issued	2019
dc.identifier.uri	http://hdl.handle.net/10453/140230
dc.description	University of Technology Sydney. Faculty of Business.	en_AU
dc.description.abstract	This thesis examines interfirm arrangements in the resource industry. Coase (1937) argues firms’ boundaries are the result of their pursuit of an optimal employment of economic resources in maximising wealth creation. Extant evidence from the financial economics literature on alliances suggests they are motivated by firms seeking to channel financial resources (Lerner, Shane & Tsai 2003; Robinson 2008), and to diversify risks and combine complementary resources (Beshears 2013; Palia, Ravid & Reisel 2007). The objective of this thesis is to examine motivations of extractive firms listed on the Australian Securities Exchange (ASX) to engage in two types of cooperative arrangements.The first alliance of interest is farmout agreements. Through keyword searches on Morningstar’s Datanalysis Premium and Factiva databases, a sample of 589 farmor (‘vendor’) and 389 farminee (‘buyer’) announcements is collected for oil and gas companies over the period 1990−2016. Announcement returns show these arrangements are economically important, with farmors (farminees) experiencing positive abnormal returns of 3.60% (1.90%) over a three-day event window. In terms of motivation, cross-sectional evidence finds support for resource-pooling, with only mixed support for the expertise hypothesis. Furthermore, farmors’ abnormal returns are positively associated with the volatility of crude oil prices, consistent with the real options theory. This thesis is the first empirical study of farmout agreements, with only descriptive evidence in Lowe (1987). Offtake agreements are the second type of alliance investigated. Using a sample of 396 offtakes announced by ASX resource firms from 1995 to 2018, there is evidence of a positive market reaction of 5.73% to project sponsors. Furthermore, there is evidence that returns are impacted by resource-pooling. For offtakes with intermediaries (e.g., trading houses), an adverse certification effect is found for the project firms. Finally, there is a positive relation between announcing firms’ abnormal return and the price volatility of a basket of commodities, confirming real options theory implications for offtake projects.	en_AU
dc.format	Thesis (PhD)
dc.language.iso	en_AU	en_AU
dc.relation	https://opus.lib.uts.edu.au/bitstream/10453/140230/3/02whole.pdf
dc.rights	au.edu.uts.lib/ppc
dc.rights	The author owns the copyright in this thesis including all reproduction and reuse rights for the work. The work may not be altered without the permission of the copyright owner. Attribution is essential when quoting or paraphrasing from this thesis.
dc.rights	info:eu-repo/semantics/openAccess
dc.title	Wealth effects of strategic alliances in the resource industry in Australia	en_AU
dc.type	Thesis	en_AU
utslib.copyright.status	open_access

Abstract:

This thesis examines interfirm arrangements in the resource industry. Coase (1937) argues firms’ boundaries are the result of their pursuit of an optimal employment of economic resources in maximising wealth creation. Extant evidence from the financial economics literature on alliances suggests they are motivated by firms seeking to channel financial resources (Lerner, Shane & Tsai 2003; Robinson 2008), and to diversify risks and combine complementary resources (Beshears 2013; Palia, Ravid & Reisel 2007). The objective of this thesis is to examine motivations of extractive firms listed on the Australian Securities Exchange (ASX) to engage in two types of cooperative arrangements.The first alliance of interest is farmout agreements. Through keyword searches on Morningstar’s Datanalysis Premium and Factiva databases, a sample of 589 farmor (‘vendor’) and 389 farminee (‘buyer’) announcements is collected for oil and gas companies over the period 1990−2016. Announcement returns show these arrangements are economically important, with farmors (farminees) experiencing positive abnormal returns of 3.60% (1.90%) over a three-day event window. In terms of motivation, cross-sectional evidence finds support for resource-pooling, with only mixed support for the expertise hypothesis. Furthermore, farmors’ abnormal returns are positively associated with the volatility of crude oil prices, consistent with the real options theory. This thesis is the first empirical study of farmout agreements, with only descriptive evidence in Lowe (1987). Offtake agreements are the second type of alliance investigated. Using a sample of 396 offtakes announced by ASX resource firms from 1995 to 2018, there is evidence of a positive market reaction of 5.73% to project sponsors. Furthermore, there is evidence that returns are impacted by resource-pooling. For offtakes with intermediaries (e.g., trading houses), an adverse certification effect is found for the project firms. Finally, there is a positive relation between announcing firms’ abnormal return and the price volatility of a basket of commodities, confirming real options theory implications for offtake projects.

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http://hdl.handle.net/10453/140230