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Oil Price Volatility and Corporate Decisions: Evidence from the GCC Region

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  • Abdulrahman Alhassan

Abstract

In this study, I examine the impact of oil price volatility on corporate decisions, namely corporate investments and dividend policy. Using a sample of 356 firms from The Gulf Cooperation Council markets spanning from 2005 to 2015, I show that corporate investments and the likelihood of paying dividends is largely influenced by oil price volatility. The evidence suggests that firms tend to invest less and are more likely to choose not to pay dividends during periods of high oil price volatility. Furthermore, I find that the impact of oil price volatility on corporate decisions tends to be stronger in financially constrained firms, using firm size as a proxy. The findings of this study are robust to controlling for macroeconomic volatility and using alternative measures of oil price volatility and alternative econometric approaches.

Suggested Citation

  • Abdulrahman Alhassan, 2019. "Oil Price Volatility and Corporate Decisions: Evidence from the GCC Region," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(9), pages 2057-2071, July.
    • Handle: RePEc:mes:emfitr:v:55:y:2019:i:9:p:2057-2071
    DOI: 10.1080/1540496X.2018.1517330
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    Cited by:

    1. Ren, Xiaohang & Qin, Jianing & Jin, Chenglu & Yan, Cheng, 2022. "Global oil price uncertainty and excessive corporate debt in China," Energy Economics, Elsevier, vol. 115(C).
    2. Bugshan, Abdullah, 2022. "Oil price volatility and corporate cash holding," Journal of Commodity Markets, Elsevier, vol. 28(C).
    3. Lee, Chien-Chiang & Wang, Chih-Wei & Thinh, Bui Tien & Purnama, Muhammad Yusuf Indra, 2023. "Cash holdings and cash flows: Do oil price uncertainty and geopolitical risk matter?," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 134-152.

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