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Oil shocks, competition, and corporate investment: Evidence from China

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  • Chen, Xian
  • Li, Yang
  • Xiao, Jihong
  • Wen, Fenghua

Abstract

This paper aims to investigate the impact of three classical oil shocks on the Chinese corporate investment by using firm-level data. Moreover, we assess the role of product market competition in the relationship between oil shocks and corporate investment. Our empirical results show that oil aggregate demand and specific demand shocks negatively affect corporate investment, while oil supply shocks show a positive effect. Notably, compared to the non-energy-related industry, the corporate investment of energy-related industry is more sensitive to these oil shocks. Furthermore, we find high competitive pressure can mitigate the impact of oil specific demand shocks on the corporate investment of energy-related industry, but competition presents a limited effect on the relationship between other oil shocks and corporate investment.

Suggested Citation

  • Chen, Xian & Li, Yang & Xiao, Jihong & Wen, Fenghua, 2020. "Oil shocks, competition, and corporate investment: Evidence from China," Energy Economics, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:eneeco:v:89:y:2020:i:c:s0140988320301596
    DOI: 10.1016/j.eneco.2020.104819
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    More about this item

    Keywords

    Oil prices; Oil shocks; Corporate investment; Product market competition; China's firms;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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