The relationship between global oil prices and the profitability of Dutch public companies
DOI:
https://doi.org/10.29015/cerem.1019Keywords:
profitability, oil price, Dutch companiesAbstract
Abstract:
Aim: This study honors the pioneering work by André Dorsman on energy finance, especially on oil prices and company performance. The objective is to investigate the relationship between the global oil price and the profitability of Dutch companies.
Design / Research methods: In our research, a model is formed which evaluates the relationship between a global oil price index and the profitability of Dutch public companies. Publicly available data from 143 Dutch listed firms during the period 2010 till 2023 has been used to conduct this research. Besides the independent variable (the oil price) and the dependent variables (return on assets and return on equity), a firm’s leverage, market capitalization and degree of internationalization are used as control variables in the conceptual model. The model is evaluated via multiple panel regression analyses.
Conclusions / findings: We reveal a positive relationship between the oil price and the return on assets as well as the return on equity. However, this relationship is dependent upon the presence of oil and energy related companies in the sample. When oil and energy related companies are removed from the sample, no relationship is found between the global oil price and profitability. The control variable market capitalization is found to be significant and positively related to return on equity and return on assets. Contrary, the control variable leverage is found to be negatively related to return on assets. The variable for degree of internationalization of Dutch firms is insignificant for all the regression models, indicating that there is no linear relationship between the degree of internationalization and profitability.
Originality / value of the article: The study confirms a complicated relationship between oil prices and company profitability.
JEL: G10, L95
References
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