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Crude oil price shocks and idiosyncratic risk: Implications for business groups

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  • TRIPATHI, Nitya Nand
  • TIWARI, Aviral Kumar
  • LEE, Chi-Chuan

Abstract

The existing literature indicates that movement and volatility in crude oil prices significantly influence macroeconomic stability, industrial dynamics, and firm-level activities. Nevertheless, there is limited research investigating how crude oil price risk affects firms' idiosyncratic risk. This research analyses differences in behavior between business group (BG) firms and stand-alone firms by exploring the relationships among crude oil price fluctuations and volatility, stock market downturns, and firms' idiosyncratic risk. The findings indicate a positive association between crude oil price fluctuations and volatility and firms' idiosyncratic risk. Compared to stand-alone firms, BG firms exhibit lower idiosyncratic risk, reflecting a risk-buffering effect.. Lastly, this research further investigates how market sentiment responds to unfavorable market conditions. The analysis indicates that corporations and investors become risk-averse when facing simultaneous stock market downturns and rising crude oil prices.

Suggested Citation

  • TRIPATHI, Nitya Nand & TIWARI, Aviral Kumar & LEE, Chi-Chuan, 2025. "Crude oil price shocks and idiosyncratic risk: Implications for business groups," Journal of Asian Economics, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:asieco:v:100:y:2025:i:c:s1049007825001319
    DOI: 10.1016/j.asieco.2025.102007
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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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