Oil market volatility and foreign ownership: the case of Saudi Arabia

Abdulrahman Alhassan, Lakshmi Kalyanaraman and Hanan Mohammed Alhussayen

International Journal of Islamic and Middle Eastern Finance and Management, 2024, vol. 17, issue 5, 991-1013

Abstract: Purpose - This study aims to evaluate the resource curse hypothesis in an oil-dependent economy, Saudi Arabia, through examining the impact of oil price volatility on foreign ownership among Saudi listed firms. Design/methodology/approach - The study analyzes a unique data set of firm-level data on foreign ownership for the period 2009–2015. A multivariate regression model was applied to analyze the relationships under study. Findings - The analysis reveals a negative association between oil price volatility and foreign ownership in firms with high leverage and low stock volatility. Research limitations/implications - Policymakers are encouraged to develop policies to control shocks in the supply and demand of oil and enforce economic diversification. Investors can better understand the dynamics of an oil-based economy stock market based on the investment behavior of foreign investors and their response to oil price shocks. Originality/value - This study adds to the literature by analyzing the relationship understudy in an oil-rich and oil-dependent emerging economy, where its critical economic parameters are influenced by oil price volatility and it has the largest and the most liquid stock exchange in the MENA region.

Keywords: Oil price volatility; Foreign ownership; Information asymmetry; Financial constraints; Stock liquidity; G11; G14; G15; Q43 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:imefmp:imefm-10-2023-0395

DOI: 10.1108/IMEFM-10-2023-0395

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