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31/03/2020
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Tran, Q. T., & Vo, T. T. T. (2022). Oil price and firm profitability: evidence from Vietnamese stock market. Journal of International Economics and Management, 20(1), 53-64. https://doi.org/10.38203/jiem.020.1.0004
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Oil price and firm profitability: evidence from Vietnamese stock market
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Abstract
Although many prior studies show that oil price affects negatively macroeconomic environment and stock prices, there are few studies on the impact of oil price on firm profitability. This paper posits that oil price tends to affect firm profitability negatively via increases in production costs and negative changes in the macroeconomic environment. As a transition economy, Vietnam has been gradually integrated into the world economy and affected by international economic shocks. Therefore, Vietnam is a potential laboratory to investigate the effect of oil price as an exogenous factor on firm profitability. Using a sample of 6,960 observations from 951 firms listed in Ho Chi Minh City Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX) between 2005 and 2016, we find supporting evidence for the negative impact of oil price on firm profitability.
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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Keywords
Oil price, Profitability, Vietnam
References
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Brown, S.P.A. and Yücel, M.K. (2002), “Energy prices and aggregate economic activity: an interpretative survey”, The Quarterly Review of Economics and Finance, Vol. 42 No. 2, pp. 193 - 208.
Caporale, G.M., Ali, F.M. and Spagnolo, N. (2015), “Oil price uncertainty and sectoral stock returns in China: a time-varying approach”, China Economic Review, Vol. 34, pp. 311 - 321.
Cashin, P., Mohaddes, K., Raissi, M. and Raissi, M. (2012), “The differential effects of oil demand and supply shocks on the global economy”, Working Paper WP/12/253, Middle East and Central Asia Department, International Monetary Fund ,Washington, October.
Cunado, J. and Gracia, F.D. (2014), “Oil price shocks and stock market returns: evidence for some European countries”, Energy Economics, Vol. 42, pp. 365 - 377.
Darko, G. and Kruger, J. (2017), “Determinants of oil price influence on profitability performance measure of oil and gas companies: a panel data perspective”, International Journal of Economics, Commerce and Management, Vol. 5 No.12, pp. 993 - 1006.
DeAngelo, H., DeAngelo, L. and Stulz, R. (2006), “Dividend policy and the earned/contributed capital mix: a test of the life-cycle theory”, Journal of Financial Economics, Vol. 81 No. 2, pp. 227 - 254.
Hamilton, J.D. (1983), “Oil and the macroeconomy since World War II”, Journal of Political Economy, Vol. 91 No. 2, pp. 228 - 248.
Hamilton, J. (1988), “A neoclassical model of unemployment and the business cycle”, Journal of Political Economy, Vol. 96 No. 3, pp. 593 - 617.
Hamilton, J.D. (1996), “This is what happened to the oil price-macroeconomy relationship”, Journal of Monetary Economics, Vol. 38 No. 2, pp. 215 - 220.
Arouri, M.E.H. and Nguyen, D.K. (2010), “Oil prices, stock markets and portfolio investment:
evidence from sector analysis in Europe over the last decade”, Energy Policy, Vol. 38 No. 8, pp. 4528 - 4539.
Isik, O. and Tasgin, U.F. (2017), “Profitability and its determinants in Turkish manufacturing industry: evidence from a dynamic panel model”, International Journal of Economics and Finance, Vol. 9 No. 8, pp. 66 - 75.
Jiménez-Rodríguez, R. and Sánchez, M. (2004), “Oil price shocks and real GDP growth:
empirical evidence for some OECD countries”, Working Paper No.362, European Central Bank, Germany, May.
Jones, D.W., Leiby, P.N. and Paik, I.K. (2004), “Oil price shocks and the macroeconomy: what has been learned since 1996”, The Energy Journal, Vol. 25 No. 2, pp. 1 - 32.
Kilian, L. (2008), “The economic effects of energy price shocks”, Journal of Economic Literature, Vol. 46 No. 4, pp. 871 - 909.
Narayan, P.K. and Sharma, S.S. (2011), “New evidence on oil price and firm returns”, Journal of Banking & Finance, Vol. 35 No. 12, pp. 3253 - 3262.
Nguyen, V.C. (2014), “Impacts of international oil price changes on Vietnam’s economy - an input-output study”, Asian Economic and Financial Review, Vol. 4, pp. 432 - 439.
Park, J. and Ratti, R. (2008), “Oil price shocks and stock markets in the U.S. and 13 European countries”, Energy Economics, Vol. 30 No. 5, pp. 2587 - 2608.
Pham, T.H.A., Chu, K.L., Dao, B.N., Nguyen, M.P. and Tran, H.T. (2015), “Bien dong gia dau the gioi va anh huong cua no den nen kinh te Viet Nam”, Unpublished Manuscript, Research report 15/02, Banking Academy.
Poghosyan, T. and Hesse, H. (2009), “Oil prices and bank profitability: evidence from major oil-exporting countries in the middle east and North Africa”, Working Paper WP/09/220, International Monetary Fund, October.
Pratheepan, T. (2004), “A panel data analysis of profitability determinants: empirical results from Sri Lankan manufacturing companies”, International Journal of Economics, Commerce and Management, Vol. 2 No. 12, pp. 1-9.
Ramos, S.B. and Veiga, H. (2010), “Asymmetric effects of oil price fluctuations in international stock markets”, UC3M Working Papers, Statistics and Econometrics, Departamento de Estadistica, University Carlos III de Madrid. Getafe (Madrid), February.
Schneider, M. (2004), “The impact of oil price changes on growth and inflation”, Monetary Policy & the Economy, No. 2, pp. 27 - 36.
Tang, W., Wu, L. and Zhang, Z.X. (2010), “Oil price shocks and their short- and long-term effects on the Chinese economy”, Energy Economics, Vol. 32 No. 1, pp. S3-S14.
Tran, H.H. (2017), “The impact of world oil prices on the stock market and macro-economic variables in Vietnam”, available at: http://tapchicongthuong.vn/tac-dong-cua-gia-dauthe-gioi-den-thi-truong-chung-khoan-va-cac-bien-vi-mo-trong-nen-kinh-te-truonghop-viet-nam-20171127022356298p0c488.htm (accessed June 06, 2019).
Trang, N.T.N. and Hong, D.T.T. (2017), “Nonlinear effects of oil prices on inflation, growth, budget deficit, and unemployment”, Journal of Economic Development, Vol. 24 No. 1, pp. 73 - 89.
Vu, T.H., Nguyen, V.D., Ho, M.T. and Vuong, Q.H. (2019), “Determinants of Vietnamese listed firm performance: competition, wage, CEO, firm size, age, and international trade”, Journal of Risk and Financial Management, Vol. 12 No. 2, pp. 1-19.