The Ups and Downs of Oil Prices: Asymmetric Impacts of Oil Price Volatility on Corporate Environmental Responsibility

Mona Yaghoubi () and Reza Yaghoubi
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Mona Yaghoubi: University of Canterbury, https://www.canterbury.ac.nz

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: This paper examines the impact of crude oil price changes on corporate environmental responsibility among U.S. non-oil and gas producer firms from 2002 to 2020, focusing on the asymmetric effects of oil price volatility. We distinguish between volatility due to increases or decreases in oil prices and find that a one standard deviation increase in oil volatility from positive price changes leads to a 12.7% decrease in environmental score, while the same increase from negative changes results in only a 5.5% decrease. Financial constraints are identified as a potential channel through which oil price volatility influences environmental activities. Specifically, a one standard deviation increase in oil volatility from positive price changes leads to an 18% decrease in environmental score for firms with high financial constraints, compared to an 8% decrease for firms with low financial constraints. Our findings are robust to sector differences and a 2SLS model addressing potential endogeneity.

Keywords: Crude oil price uncertainty; asymmetric effect; corporate environmental responsibility; financial constraints (search for similar items in EconPapers)
JEL-codes: G31 G32 Q41 Q56 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2024-07-01
New Economics Papers: this item is included in nep-ene and nep-env
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