Systemic risk spillovers among global energy firms: Does geopolitical risk matter?

Jiahao Liu, Bo Zhu and Xin Hu

Energy Economics, 2024, vol. 140, issue C

Abstract: In recent years, the worsening global geopolitical conditions have led investors and policy makers to become increasingly concerned about systemic risk in the global energy market. However, the existing literature has little empirical evidence on this problem from a geopolitical perspective. Based on an Elastic-Net-VAR model for depicting high-dimensional left-tail interdependence, this paper measures time-varying systemic risk spillovers among 212 energy firms in 36 countries. Then, a panel data model is established to examine the impact of geopolitical risk (GPR) on risk spillovers. Our results indicate that the GPR of a country directly intensifies the risk spillovers of the country's energy firms, as well as spreads to other countries based on geographic proximity and energy trade flows and indirectly intensifies the risk spillovers of the energy firms in these countries. Specifically, the indirect effects of GPR are more pronounced than the direct effects for fossil fuel firms, in oil-consuming countries, and during stable periods in global geopolitics. Moreover, the potential firm-level mechanisms through which GPR intensifies risk spillovers are declines in asset turnover, deceleration in corporate investment, and negative market forecasts. These findings can help to mitigate the adverse effects of GPR on energy firm performance, national energy security, and stability in the global energy market.

Keywords: Complex network; Energy firm; Geopolitical risk; Systemic risk spillover (search for similar items in EconPapers)
JEL-codes: C21 C33 G32 Q49 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S014098832400745X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:140:y:2024:i:c:s014098832400745x

DOI: 10.1016/j.eneco.2024.108036

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().