Mergers and Acquisitions: The Performance of the Acquiring Firm-Empirical Study of Cheverontexaco

Emmanuel Opoku Marfo, Kwame Oduro Amoako, Evans Kelvin Gyau


This paper analyzes a merger in the oil industry; in the case of Chevron and Texaco. Oil is assumed to be a homogeneous good which is produced by a small number of firms with different unit costs. Merger formation is endogenously explained as a result of cooperative decisions. It is shown that merger participants are very asymmetric if prior costs of production differences are moderate. If cost differences are large, however, the more efficient firms participate in the mergers to enjoy production efficiency, while the least efficient firms are not attractive partners and, therefore, remain independent in the post-merger market. Moreover, the research tries to investigate Chevron share returns if the merger has achieved its goal of maximizing shareholders wealth.


ChevronTexaco; Merger formation; Oil industry

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