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Corporate investment decisions and related commodities: International evidence from energy and mining industries

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  • Smimou, K.
  • Abrokwah, M.
  • Drougas, A.

Abstract

This study examines the crucial effect of commodity futures fundamentals on managerial corporate investment decisions of diverse samples of commodity producers and related firms in the U.S. and Canada. Findings show that managers' upward or downward shift of investments manifested by a change of capital allocation of commodity firms are driven more importantly by price movement of the most highly liquid commodity they produce in addition to hedging more than speculative activities of participants in the futures markets. Despite an assumed influential role, speculators' positions in the futures markets do not convey a sufficiently strong signal to influence managerial investment decisions of commodity firms aiming to fine-tune their capital and internal investment allocations, most notably for individual U.S. mining firms. Given the inextricable commodity–stock relationship, results suggest that managers learn, and act based on hedging activities in commodity futures markets but less so from speculators' positions on specific highly liquid commodity futures. This channel of influence may play the role of another corporate governance mechanism whereby commodity futures' participants exert a strong influence directly or indirectly on corporate policy decisions pertinent to internal investment.

Suggested Citation

  • Smimou, K. & Abrokwah, M. & Drougas, A., 2025. "Corporate investment decisions and related commodities: International evidence from energy and mining industries," Energy Economics, Elsevier, vol. 149(C).
    • Handle: RePEc:eee:eneeco:v:149:y:2025:i:c:s0140988325005936
    DOI: 10.1016/j.eneco.2025.108766
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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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