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The Financing Decision of Oil and Gas Companies: The Role of Country Level Shareholder Protection

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Regulations in the Energy Industry

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Abstract

This chapter investigates the financing decisions of oil and gas companies in various countries for the period from 2001 to 2015. We focus on the determinants of proportions of both internal (cash flows) and external (debt and equity) funds used in the financing of capital expenditures and aim to understand which theories explain the financing decisions of oil and gas companies. The results provide strong support to the dynamic trade-off theory and partial support to the pecking order and market timing theories. The choice of financing source depends on the shareholder protection at the country level. Companies in countries with a high level of shareholder protection are willing to issue more equity than companies in countries with a low level of shareholder protection.

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Notes

  1. 1.

    This restriction controls the effects of possible capital structure differences of the IPO (Initial Public Offering) firms on our analysis in few years after they went to the public.

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Authors and Affiliations

  1. University of Groningen, Faculty of Economics and Business, Groningen, The Netherlands

    Halit Gonenc, Oleksandr Lebediev & Wim Westerman

Authors
  1. Halit Gonenc
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  2. Oleksandr Lebediev
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  3. Wim Westerman
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Corresponding author

Correspondence to Halit Gonenc .

Editor information

Editors and Affiliations

  1. Department of Finance, SBE, VU University Amsterdam, Amsterdam, The Netherlands

    André Dorsman

  2. University of Illinois at Chicago, Chicago, IL, USA

    Özgür Arslan-Ayaydin

  3. Louvain Finance (LIDAM) Louvain School of Management, Université Catholique de Louvain, Louvain-la-Neuve, Belgium

    James Thewissen

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Gonenc, H., Lebediev, O., Westerman, W. (2020). The Financing Decision of Oil and Gas Companies: The Role of Country Level Shareholder Protection. In: Dorsman, A., Arslan-Ayaydin, Ö., Thewissen, J. (eds) Regulations in the Energy Industry. Springer, Cham. https://doi.org/10.1007/978-3-030-32296-0_8

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