internationalized (A), interstate (B), intrastate (C). First, a Type A conflict is an international-level conflict that involves a third country other than the parties in the dispute. Examples include the Gulf War in 1991, the Afghanistan War in 2001, and the Iraq War in 2003. A Type B conflict involves a conflict between countries in the Middle East region. Examples include the Iraq–Kuwait War in 1990, the Armenia–Azerbaijan War in 1991, and the Israel–Lebanon War in 2006. A Type C conflict is a civil war that is fought between forces belonging to the same state and which gives rise to more than 1,000 deaths. Civil wars occur within the borders of a country and a major conflict of this type can have a destructive effect on that country’s economy and business environment. Representative examples of Middle Eastern civil wars include those in Iraq, Yemen, Syria, and Georgia. In categorizing the 20 selected events of Middle East conflicts from 1990 to 2013, one finds that 5 Type A, 4 Type B, and 11 Type C conflicts have occurred (Table 1). Table 1. Middle East conflicts and number of oil companies in each event by type Type Date Name States involved NOCs IOCs A January 16, 1991 First Iraq War Iraq, Kuwait, US, 28 countries 3 12 December 17, 1998 The U.S./U.K. airstrike Iraq 7 17 October 7, 2001 Afghanistan War Afghanistan, NATO 9 18 March 20, 2003 Second Iraq War US, Iraq 10 18 March 20, 2011 Libyan War Libya, NATO 12 20 A 41 85 B August 2, 1990 Gulf War Iraq, Kuwait 3 12 December 29, 1991 War Armenia, Azerbaijan 3 12
Did not participate France Russia Total, Lukoil Surgutneftegas, TNK-BP, Novatek Iraq war in 2003 Participated US UK Netherlands Spain Australia Exxon Mobil, BP, Shell, Chevron, Eni, Conoco Phillips, Repsol, BG, Apache, Devon Energy, Anadarko, BHP Billiton, Chesapeake Did not participate France Russia Total, Lukoil Surgutneftegas, TNK-BP, Novatek Libyan war in 2011 Participated US UK Netherlands Italy Spain Australia Canada Mobil, BP, Shell, Chevron, Eni, Conoco Phillips, Repsol, BG, Apache, Devon Energy, Anadarko, BHP Billiton, Chesapeake, CNR Did not participate France Russia Total, Lukoil Surgutneftegas, TNK-BP, Novatek The use of the event study method became common following the work of Fama et al. (1969). In this study, the market model of event study method is used to assess normal returns when events have not occurred as well as when abnormal return (AR)s arise following an event occurrence. In order to obtain a normal rate of return (i.e., as if the event had not occurred), we choose a 100-day estimation period from 120 to 21 days before the event. We assess the AR by specifying a 40-day event window from 20 days before to 20 days after the event (MacKinlay, 1997). For the analysis on the returns of IOCs by Middle East wars, we assess the abnormal return by specifying a 10-day event window from 5 days before to 5 days after the event and choose a 20-day estimation period from -25 to -5 days before the event. In addition to this, we separate event windows into several phases for a statistical test of cumulative average ARs (CARs), for example, into periods of 5, 10, 15, and 20 days after the event. The AR is estimated as follows by using the difference in the ex post return (), which
IOCs NOCs Type Date a Mean t-statistic p-value Mean t-statistic A 5 -0.008 -7.670 0.001 0.004 4.516 0.006 10 -0.005 -4.162 0.002 0.009 3.721 0.004 15 -0.006 -6.170 0.000 0.010 5.550 0.001 20 -0.006 -5.587 0.000 0.010 6.660 0.001 B 5 0.005 2.324 0.068 0.014 4.933 0.004 10 0.006 4.084 0.002 0.015 9.471 0.001 15 0.010 5.449 0.000 0.017 10.879 0.001 20 0.007 3.562 0.002 0.017 13.372 0.001 C 5 0.002 6.657 0.001 0.010 8.572 0.001 10 0.001 2.436 0.035 0.013 10.083 0.001 15 0.000 -0.365 0.721 0.014 12.936 0.001 20 -0.001 -0.898 0.380 0.015 15.258 0.001 a Date indicate number of days following the event. Table 5. Cumulative abnormal returns of IOCs and t-test results IOCs in countries that participated in wars IOCs in countries that did not participate in wars Event period Mean t-statistics P-value Pr(T>t) Mean t-statistics P-value Pr(T<t) -5 to +5 days 0.020 5.728 0.001 *** -0.008 -4.877 0.001 *** -5 to 0 days 0.012 3.602 0.015 ** -0.011 -4.947 0.004 *** 0 to 5 days 0.009 3.073 0.027 ** 0.010 5.197 0.004 *** 4. Conclusion