The influence of oil price uncertainty on corporate debt risk: Evidence from China

Abstract

The uncertainty of international oil price has significant impacts on the macroeconomy and on firm-level business activities. It may affect the corporate economic activity through several channels and transmission mechanisms. This paper investigated the relationship between oil price uncertainty and corporate debt risk using the micro panel data of non-financially listed enterprises in China from 2010 to 2018. The results showed that an increase in oil price volatility deepens corporate debt risks, and the mediating and moderating effects demonstrated that oil price volatility indirectly worsens corporate debt risks through channel variables such as debt maturity, weakened solvency, and deepening zombification degree. Further analysis of the results indicated that the impact of oil price volatility on corporate debt risk is remarkably heterogeneous among different enterprises and is more serious in enterprises with lower financing constraints, in non-state-owned enterprises, and in energy-intensive enterprises.

Keywords

• Oil price uncertainty
• Corporate debt risk
• Channel mechanism
• Debt paying ability