Oil price uncertainty and the cost of debt: Evidence from the Chinese bond market

Tian Gan, Yan Jiang, Xi Wu and Mingxin Zhang

Journal of Asian Economics, 2023, vol. 87, issue C

Abstract: This paper explores the impact of oil price uncertainty affects the cost of debt in China. By analyzing the bond data from 2008 to 2019 in China, we find that oil price fluctuation boost bond offering spread, denoting that oil price uncertainty may increase the cost of debt. This increase is likely due to higher default risks resulting from the heightened oil price uncertainty. Moreover, non-state-owned firms and those in the energy industry are more susceptible to the effects of oil price volatility. Our findings also reveal an asymmetric effect of oil price uncertainty on the cost of debt, with a stronger impact observed from positive uncertainty compared to negative uncertainty. This study contributes to the current understanding of the ways in which oil price uncertainty impacts the cost of debt in an emerging country.

Keywords: Oil price uncertainty; Bond offering spread; Default risk; Bond market; The cost of debt (search for similar items in EconPapers)
JEL-codes: G30 G31 G32 Q43 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:87:y:2023:i:c:s104900782300057x

DOI: 10.1016/j.asieco.2023.101637

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