The importance of managerial ability on crude oil price uncertainty-firm performance relationship

• Published in: Energy economics 2020-05, Vol.88, p.104778, Article 104778
• Main Authors: Phan, Dinh Hoang Bach, Tran, Vuong Thao, Nguyen, Dat Thanh, Le, Anh
• Format: Article
• Language: English
• Subjects: Ability; Crude oil; Crude oil price uncertainty; Crude oil prices; Economic significance; Energy economics; Firm performance; Managerial ability; Oil; Organizational performance; Petroleum; Robustness; Uncertainty
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/j.eneco.2020.104778

This paper investigates the effect of crude oil price uncertainty on firm performance and how the managerial ability impacts on this relationship. Using a large sample of 13,610 U.S firms from 1983 to 2016, we reveal two main findings. Consistent with our hypothesis, we find strong evidence for a negative effect of crude oil price uncertainty on firm performance at both aggregate market and sectoral levels. However, managerial ability helps firms dampen a significant proportion (approximately 20%–50%) of the negative effect. These findings are consistent in several robustness tests. •We find evidence of a negative effect of crude oil price uncertainty on firm performance.•The effect is found at both aggregate market and sectoral levels.•The effect is stronger in high volatility, high external dependence, and high financial distress firms.•Managerial ability helps firms dampen a significant proportion (approximately 20%–50%) of the negative effect.•The role of managerial ability is more critical for firms with higher volatility and financial distress.