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Oil supply expectations and corporate social responsibility

Lin Chen, Fenghua Wen, Yun Zhang and Xiao Miao

International Review of Financial Analysis, 2023, vol. 87, issue C

Abstract: This paper examines how changes in oil supply expectations affect the social responsibility scores of Chinese listed companies and attempts to identify the source of this expectations in terms of uncertainty and orderliness of OPEC production. We document strong evidence that supply news shocks have a statistically and economically significant impact on corporate social responsibility. Supply expectations strongly impact social responsibility performance in the energy sector, with negative news leading to higher oil prices and increased economic uncertainty. Based on real options theory and precautionary storage effects, firms increase oil inventories when OPEC announcements are disclosed. This leads to increased tension in firms' cash flows, which provides evidence of the expected supply channel operation.

Keywords: OPEC announcement; Corporate social responsibility; Oil supply expectations; Cash flow uncertainty; Economic policy uncertainty (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1016/j.irfa.2023.102638

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