Energy Firm’s Financial Distress, Industry Shock and the Price of Oil and Gas Assets
(2019) BUSN79 20191Department of Business Administration
- Abstract
- A sample of 107 asset sales completed globally from October 2006 to January 2019
has been investigated to find the average discount at which the assets of distressed energy companies are liquidated. In the next step, the difference in difference approach has been used to explore the oil price crash in the fourth quarter of 2014 so as to find the difference in the average discount on the assets of distressed firms relative to the discount on the assets of other firms following the shock. I find that energy companies sell their assets at discounts during distressed times. The average discount on the assets of firms with low debt capacity is 9.42 percent. An interesting finding is that mere existence of high leverage or negative cash flow... (More) - A sample of 107 asset sales completed globally from October 2006 to January 2019
has been investigated to find the average discount at which the assets of distressed energy companies are liquidated. In the next step, the difference in difference approach has been used to explore the oil price crash in the fourth quarter of 2014 so as to find the difference in the average discount on the assets of distressed firms relative to the discount on the assets of other firms following the shock. I find that energy companies sell their assets at discounts during distressed times. The average discount on the assets of firms with low debt capacity is 9.42 percent. An interesting finding is that mere existence of high leverage or negative cash flow does not lead to selling the assets at a discount while simultaneity of them does. Firms in the sample experiencing both high leverage and negative cash flow sold their assets at an average discount of 12.72 percent. The results of the difference in difference approach indicate that firms with low debt capacity sell their assets at an average discount of 13.58 percent after the shock while their assets are not sold at discount prior to the shock. Moreover, firms suffering from both negative cash flow and low debt capacity sell their assets at 10.24 percent discount relative others prior to the shock While this difference increases to 26.88 percent after. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/8988682
- author
- Alavi Nasab, Zahra Sadat LU
- supervisor
- organization
- course
- BUSN79 20191
- year
- 2019
- type
- H1 - Master's Degree (One Year)
- subject
- language
- English
- id
- 8988682
- date added to LUP
- 2019-09-30 13:46:47
- date last changed
- 2019-09-30 13:46:47
@misc{8988682,
abstract = {{A sample of 107 asset sales completed globally from October 2006 to January 2019
has been investigated to find the average discount at which the assets of distressed energy companies are liquidated. In the next step, the difference in difference approach has been used to explore the oil price crash in the fourth quarter of 2014 so as to find the difference in the average discount on the assets of distressed firms relative to the discount on the assets of other firms following the shock. I find that energy companies sell their assets at discounts during distressed times. The average discount on the assets of firms with low debt capacity is 9.42 percent. An interesting finding is that mere existence of high leverage or negative cash flow does not lead to selling the assets at a discount while simultaneity of them does. Firms in the sample experiencing both high leverage and negative cash flow sold their assets at an average discount of 12.72 percent. The results of the difference in difference approach indicate that firms with low debt capacity sell their assets at an average discount of 13.58 percent after the shock while their assets are not sold at discount prior to the shock. Moreover, firms suffering from both negative cash flow and low debt capacity sell their assets at 10.24 percent discount relative others prior to the shock While this difference increases to 26.88 percent after.}},
author = {{Alavi Nasab, Zahra Sadat}},
language = {{eng}},
note = {{Student Paper}},
title = {{Energy Firm’s Financial Distress, Industry Shock and the Price of Oil and Gas Assets}},
year = {{2019}},
}