Financial Characteristics and Risk Strategy Analysis of Oil Giant Companies under The Background of Global Economic Recession

Qingrui Luo ()
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Qingrui Luo: Xiamen University Malaysia, School of Economics and Management

A chapter in Proceedings of the 9th International Conference on Financial Innovation and Economic Development (ICFIED 2024), 2024, pp 442-449 from Springer

Abstract: Abstract In the context of the evolving energy industry, this study provides a comparative analysis of two industry giants, ExxonMobil and Royal Dutch Shell. The study aims to examine their financial health, with a particular focus on three key metrics: leverage, weighted average cost of capital (WACC), and asset Beta (βa). The study adopted quantitative research methods to carefully collect and analyze the financial data of the two companies. The results revealed striking differences in their financial characteristics. ExxonMobil is more leveraged, with a WACC about 4 percent higher than Royal Dutch Shell and an asset beta of 1.01, indicating greater sensitivity to market volatility. In contrast, Shell has lower leverage, a low WACC and an asset beta of 0.49, reflecting a more stable market reaction. These results underscore the critical importance of aligning financial structures with strategic objectives. ExxonMobil’s conservative financial strategy may help reduce risk, while Shell’s lower cost of capital may provide a competitive advantage in seeking investments. In conclusion, this study reveals the critical role of financial dynamics in the energy sector, providing valuable insights for investors and industry stakeholders. Future research may explore additional financial metrics and industry-specific factors to further enrich our understanding of these companies’ financial strategies.

Keywords: Financial Health; ExxonMobil; Third Keyword (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-408-2_50

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DOI: 10.2991/978-94-6463-408-2_50

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