Corporate Debt and Stock Returns : Evidence from U.S. Firms during the 2020 Oil Crash
This paper explores the effect of oil price fluctuations on the stock returns of U.S. oil firms using an identification strategy through heteroskedasticity, exploiting the 2020 oil price crash. The results are twofold. First, a decline in oil price...
| Main Authors: | , , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2022
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/099321006132232621/IDU0a5790cde017dc04db90beef0f0fdcc68dbc6 http://hdl.handle.net/10986/37548 |
| Summary: | This paper explores the effect of oil
price fluctuations on the stock returns of U.S. oil firms
using an identification strategy through heteroskedasticity,
exploiting the 2020 oil price crash. The results are
twofold. First, a decline in oil prices significantly
reduces oil firms’ stock returns. On average, a 1 percent
decline in oil prices leads to a 0.44 percent decline in
stock prices. Second, firm debt appears irrelevant in
mediating the effect of oil prices on oil firms’ stock
returns. Moreover, the muted role of debt was not likely
caused by the liquidity backstop provided by the Federal Reserve. |
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