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Oil Price Volatility, Organization Capital, and Firm Performance

Author

Listed:
  • Kamal, Javed Bin

    (East West University)

  • Costa, Mabel D.

    (Durham University)

  • Habib, Ahsan

    (Massey University)

Abstract

We examine the relationship between oil price volatility and firm performance, and the moderating role of organization capital on this relationship. Using U.S. firm-level data during the period of 1986-2017, our analysis reveals several key findings. Consistent with the real option theory, we find that oil price volatility negatively affects firm performance. However, this adverse effect of oil price volatility is reduced for firms with high levels of organization capital. Interestingly, this moderating effect of organization capital is more pronounced for firms with large cash holdings. Overall, our findings substantiate the idea that firms with high levels of organization capital can hedge oil price related volatilities effectively. Findings from several robustness tests support our key results.

Suggested Citation

  • Kamal, Javed Bin & Costa, Mabel D. & Habib, Ahsan, 2022. "Oil Price Volatility, Organization Capital, and Firm Performance," American Business Review, Pompea College of Business, University of New Haven, vol. 25(2), pages 488-514, November.
    • Handle: RePEc:ris:ambsrv:0066
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    File URL: https://digitalcommons.newhaven.edu/americanbusinessreview/vol25/iss2/11/
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    More about this item

    Keywords

    Organization Capital; Oil Price Volatility; Firm Performance; Cash Holdings;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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