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Oil price returns and firm's fixed investment: A production pattern

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  • Yin, Libo
  • Yang, Sen

Abstract

This paper aims to enlarge the acquaintance with the influence of oil price returns on fixed investment of all Chinese non-financial listed companies. According to our empirical results, oil price returns have a statistically and economically significant and negative predictive power for firm's fixed investment. Other main findings can be summarized as follows: (i) this oil return effect is robust and consistent even considering oil shocks and its different sources; (ii) the heterogeneities of this effect across industries and industrial layers present a “production pattern”; (iii) a composite cost and the financing constraints theory reveal the heterogeneities across firms with varying financial constraints, investment irreversibility, and industry competition; (iv) a combination of changes in demand stimulation and cost pressures contributes to the asymmetric impacts of oil price returns, which vary throughout the oil prices distribution.

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  • Yin, Libo & Yang, Sen, 2023. "Oil price returns and firm's fixed investment: A production pattern," Energy Economics, Elsevier, vol. 125(C).
    • Handle: RePEc:eee:eneeco:v:125:y:2023:i:c:s0140988323003948
    DOI: 10.1016/j.eneco.2023.106896
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