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

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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.

Suggested Citation

  • Mona Yaghoubi & Reza Yaghoubi, 2024. "The Ups and Downs of Oil Prices: Asymmetric Impacts of Oil Price Volatility on Corporate Environmental Responsibility," Working Papers in Economics 24/11, University of Canterbury, Department of Economics and Finance.
    • Handle: RePEc:cbt:econwp:24/11
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    File URL: https://repec.canterbury.ac.nz/cbt/econwp/2411.pdf
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    More about this item

    Keywords

    Crude oil price uncertainty; asymmetric effect; corporate environmental responsibility; financial constraints;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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