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The Impact of Vertical Integration and Horizontal Diversification on the Value of Energy Firms

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The Econometrics of Energy Systems

Abstract

We analyse the long-run return performance of 27 value-weighted equity portfolios based on a classification of the US energy sector that follows traditional industrial organization categories. When adjusted to market and fuel risks, portfolio returns show that both vertical integration and horizontal diversification failed to produce shareholder value during the 1990–2003 period. This confirms the theoretical predictions of both financial economics and industrial organization and shows that the wave of corporate restructuring that has interested US energy industries over the last decade may have occurred at a net cost to firm shareholders.

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Authors
  1. Carlo Pozzi
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  2. Philippe Vassilopoulos
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Editor information

Editors and Affiliations

  1. Centre de Géopolitique de l’Energie et des Matières Premières (CGEMP), Dauphine University, Paris, France

    Jan Horst Keppler (Professor of Economics, Senior Researcher) (Professor of Economics, Senior Researcher)

  2. Dauphine University, France

    Régis Bourbonnais (Assistant Professor) (Assistant Professor)

  3. Energy and Environmental Policy Group, LEPII Laboratory Grenoble, France

    Jacques Girod (Director of Research (CNRS) (Director of Research (CNRS)

Copyright information

© 2007 Carlo Pozzi and Philippe Vassilopoulos

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Pozzi, C., Vassilopoulos, P. (2007). The Impact of Vertical Integration and Horizontal Diversification on the Value of Energy Firms. In: Keppler, J.H., Bourbonnais, R., Girod, J. (eds) The Econometrics of Energy Systems. Palgrave Macmillan, London. https://doi.org/10.1057/9780230626317_11

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