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Impact of energy uncertainty on corporate credit risk

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  • Bahukhandi, Rituparn
  • Singhal, Himanshu
  • Chakraborty, Madhumita

Abstract

We investigate how energy-related uncertainty influences corporate credit risk using U.S. firm-level data. We find that higher energy uncertainty leads to lower credit ratings, especially for large, investment-grade, and manufacturing firms, a result reinforced by complementary analyses using Credit Default Swap (CDS) spreads and Probability of Default (PD). We identify two key transmission channels for this impact: firm-performance volatility and systematic risk. Propensity score matching and entropy balancing validate our results. Our findings underscore the importance of incorporating energy-related uncertainty into corporate credit risk assessments.

Suggested Citation

  • Bahukhandi, Rituparn & Singhal, Himanshu & Chakraborty, Madhumita, 2026. "Impact of energy uncertainty on corporate credit risk," Finance Research Letters, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:finlet:v:88:y:2026:i:c:s1544612325024195
    DOI: 10.1016/j.frl.2025.109170
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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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