Do oil market shocks affect financial distress? Evidence from firm-level global data

Mohammad Mahdi Mousavi, Giray Gözgör and Albert Acheampong

Journal of Commodity Markets, 2024, vol. 36, issue C

Abstract: This study investigates the impact of three oil price shocks on financial distress of global firms using a dataset of 8130 firms across 48 countries from 2002 to 2022. It also analyses the role of energy diversification in the relationship between oil shocks and firm distress. The findings reveal that aggregate demand and specific demand shocks increase firm distress risk, while supply shocks reduce it. Furthermore, the results suggest that energy diversification mitigates the impact of specific demand shocks on firm distress. The study also implements several robustness checks, and the results remain consistent. Potential policy implications are also discussed.

Keywords: Firm distress risk; Oil price shocks; Oil-specific demand shock; Aggregate demand shock; Energy diversification (search for similar items in EconPapers)
JEL-codes: G17 G32 G33 Q40 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:36:y:2024:i:c:s2405851324000552

DOI: 10.1016/j.jcomm.2024.100436

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