Disentangling Oil Price Shocks and Corporate Financial Risk: The Moderating Role of Environmental Disclosure

Abstract

This study investigates the effect of different types of oil price shocks—supply, demand, and risk shocks—on corporate financial risk and further explores whether environmental information disclosure moderates this relationship. Drawing on a panel dataset of 18,630 firm-year observations from Chinese listed companies, the analysis adopts a structural decomposition approach to oil price volatility. The findings reveal that oil price shocks significantly exacerbate corporate financial risk, with supply-side shocks exhibiting the most pronounced effects, followed by demand and risk shocks. Notably, the heterogeneity reveals that non-state-owned enterprises and energy-intensive industries exhibit greatersensitivity to oil price shocks. Firms with more transparent environmental disclosure demonstrate greater resilience to oil shocks. The results support the view that environmental disclosure mitigates financing constraints and information asymmetry, thereby reducing firms’ vulnerability to external energy shocks. This analysis introduces environmental disclosure as a novel moderating mechanism that enhances corporate risk management and sustainability alignment. These findings offer practical implications for firms navigating volatile energy markets and provide a more nuanced understanding of the energy–finance nexus.