Energy Firms Research Articles

The Political Economy of Rent-Seeking: Evidence from Spain’s Support Policies for Renewable Energy

This paper provides a theoretical framework to explore how the support policies for renewable energies can promote rent-seeking incentives in private firms. We develop a political economy of rent-seeking that considers the link between the regulatory decisions of political agents and the potential scope of socially wasteful pursuits. We argue that systematic public support schemes bring rent-seeking as a perception shared by entrepreneurs that influencing political allocations of resources is an essential and potentially preferable source of private profit than other for-profit economic avenues. As evidence of our claims, the framework is applied to the case of Spain to illustrate the economic effects of support policies on the production and distribution of renewable energy. We find rent-seeking behavior in Spain’s renewable energy industry, and precisely that: (i) political regulations have induced market concentration and rent-seeking in renewable energy firms, (ii) these firms have required increasing regulations and premiums to survive, and (iii) energy consumers are forced to pay rent-seeking through increasingly expensive electricity bills. The analysis reveals some challenges and opportunities to drive efficient market-based policies to strengthen entrepreneurial competition and curb rent-seeking behavior. These insights have relevant proposals for the Spanish energy industry in complying with the EU Green Deal through a sustainable transition and comprehensive growth.

Soft skills, hard skills: What matters most? Evidence from job postings

Using a proprietary database of online job postings from 2010 to 2019, we find that job vacancies in the U.S. energy sector increasingly require high levels of “soft” skills (such as social, cognitive, people management, project management, and customer service skill), showing an “upskilling” pattern in the past decade. We further examine skill requirements across and within four major professional occupations in the U.S. energy sector and find substantial variations. Meanwhile, in the energy sector, although cognitive and social skills are the most frequently required skills, they do not positively contribute to firm productivity. Although the requirement for “hard” skills (such as products and marketing, engineering, and general computer skill) stays relatively flat, “hard” skills actually matter most in the energy sector, especially products and marketing and general computer skills are two most valuable skills, contributing the highest to energy firms. Our results indicate that energy firms should pay more attention to “hard” skills in human resource management, while not following the increasing trend of “soft” skills in hiring.

Trade conflicts and energy firms' market values: Evidence from China

Using the Sino-U.S. trade conflict on March 22, 2018 as an exogenous shock, this study shows that Chinese energy firms engaged with overseas business experienced statistically significant negative decline in their stock return. We further document that non-state-owned enterprises, firms faced with higher degree of marketization, high-tech firms, firms with a larger proportion of skilled labor and firms under moderate financial constraints suffer more from the Sino-U.S. trade conflict. This study suggests that firms with larger overseas revenue and the upstream sector should be especially careful about the possible risks in international trade.

Impact of COVID-19 on stock price crash risk: Evidence from Chinese energy firms

This paper studies the impact of the outbreak of coronavirus disease 2019 (COVID-19) on the stock price crash risk of energy firms in China. We find that the stock price crash risk of energy firms significantly decreases in the post-COVID-19 period. We also find that firms that engage in more corporate social responsibility (CSR) activities are less exposed to stock price crash risk in the post-COVID-19 period than those that engage in less CSR activities. Finally, we show that the effect of COVID-19 on stock price crash risk is less severe for state-owned enterprises (SOEs) than for non-SOEs in the post-COVID-19 period. Our findings demonstrate China's economic recovery in the post-COVID-19 period and have policy implications for firms to improve their resilience to exogenous shocks.

The dynamic dependence of natural gas and renewable energy stock markets

We measure the dynamics dependence structure between the European renewable energy stock (ERIX) market, natural gas, and other clean energy markets from 2008 to 2021 by adopting static and time-varying copula approaches. Empirical results show strong and positive dependence between ERIX and S&P global clean energy stock markets symmetric tail dependence, which indicates S&P clean energy assets provide limited hedging condition on the ERIX market and extreme upward and downward clean prices have a similar impact on the ERIX market. Furthermore, our evidence on the co-movement mechanisms between European renewable energy and clean energy markets is helpful for policymakers and investors. Governments need to adopt fiscal policy tools for clean energy firms when renewable energy prices rise (fall) together. Investors can assess and control potential risk contagion between European renewable energy stock markets and other clean energy markets via information about co-movement mechanisms.

Economic policy uncertainty, marketization level and firm-level inefficient investment: Evidence from Chinese listed firms in energy and power industries

This study examines the impact of economic policy uncertainty on inefficient investment of energy and power firms. Analyzing a sample of publicly listed energy and power firms in China, we show that uncertainty concerning economic policy negatively affects firms' inefficient investment. This influence is more prominent for firms headquartered in the regions with a low level of marketization. These findings are robust to use alternative measures of corporate inefficient investment and economic policy uncertainty, two-way clustering method, and two-stage least squares approach. In addition, our results indicate that the strength of the relationship between economic policy uncertainty and inefficient investment is reinforced for firms with high government subsidies, less managerial ownership, and weak external auditors.

Imposing versus Enacting Commitments for the Long‐Term Energy Transition: Perspectives from the Firm

Imposing versus Enacting Commitments for the Long‐Term Energy Transition: Perspectives from the Firm

Stemming the downturn: How ambidexterity and public policy influence firm performance stability during economic crises

A key question confronting policy makers during economic crises is how they can support firms to maintain their performance levels until the economic storm has passed. The present study bridges insights from the ambidexterity and public policy literatures to examine how firm-internal responses (that is, ambidexterity) and external public policy incentives (that is, demand-pull policies) affect the stability of firms’ performance in a recessionary economic context. Using data from private German renewable energy firms at a time following the global financial crisis, we find that only firms with low ambidexterity achieve performance stability in light of demand-pull policies. This research draws attention to the relevance of stability as a policy-relevant performance measure during times of economic crises. Further, we suggest that greater insight into the interplay of managerial and political factors is necessary to enable policy makers to support the stability of certain industries during crises.

The Influence of Oil Prices on Equity Returns of Canadian Energy Firms

Using monthly data from January 2000 to August 2018, this paper examines how the Canadian oil and gas industry and individual firms’ equity prices react to oil price fluctuations, which are measured by the traditional West Texas Intermediate (WTI) benchmark and the Canada-specific Western Canadian Select (WCS) benchmark. The findings provide support for the view that oil price movements are an important factor in explaining the equity returns of the overall industry and for many individual oil and gas firms in Canada. Both WTI and WCS measures provide statistically significant evidence, but the results support that WTI may still be the more relevant measure for Canadian-based firms. We also find that the spread between WTI and WCS has a minimal impact on the firms’ equity returns. Additional tests for asymmetric impacts of oil price movements on Canadian oil and gas equity returns have provided little evidence, whereas time-varying impacts are found for a handful of firms. The empirical findings predicated on the holistic view of the impacts of oil price fluctuations on equity market returns will enhance investor confidence and strengthen the Canadian economy.

Designing low carbon innovation organisations: the Energy Technologies Institute experience

If clean energy innovation is to be accelerated at the pace required, new approaches to designing public innovation organisations need to be developed. Despite the importance of these organisations in driving sustainability transitions, their role has not yet been explored in the literature. This paper addresses this gap by refining ten principles for publicly funded innovation organisation design and applying them to a detailed case study of the Energy Technologies Institute (ETI), UK. Results demonstrate that the ETI's design reflected broader political and industrial relationships at the time of its formation, embedding six large, incumbent energy firms. This effected its ability to pursue the riskier aspects of its mission, resulting in the pursuit of more incremental technologies and outputs. Generalisable aspects of effective innovation organisation design and opportunities to further develop the principles are also identified.

Price Leadership and Volatility Linkages between Oil and Renewable Energy Firms during the COVID-19 Pandemic

The COVID-19 pandemic is having a strong influence in all areas of society, like wealth, economy, travel, lifestyle habits, and, amongst many others, financial and energy markets. The influence in standard energies, like crude oil, and renewable energies markets has been twofold: from one side, the predictability of volatility has strongly decreased; secondly, the linkages of the price time series have been modified. In this paper, by using DCC-GARCH and Price Leadership Share methodology, we can investigate the changes in the influences between standard energies and renewable energies markets by analyzing one-minute time series of West Texas Intermediate crude oil futures contract (WTI), the Brent crude oil futures contract (BRENT), the STOXX Europe 600 oil & gas index (SXEV), and the European renewable energy index (ERIX). Our results confirm volatility spillover between the time series. However, when assessing the accuracy of the predictability of the DCC-GARCH model, the results show that the model fails its prediction in the period of higher instability. Besides, we found that price leadership has been strongly influenced by the virus spreading stages. These results have been obtained by dividing the period between September 2019 and January 2021 into 6 subperiods according to the pandemic stages.

Trade policy uncertainty, political connection and government subsidy: Evidence from Chinese energy firms

This paper analyzes the causal relationship between trade policy uncertainty, government subsidies, and the role of political connections using annual data on Chinese energy firms from 2003 to 2018. The results show that when trade policy uncertainty increases, the Chinese government tends to increase subsidies for energy firms, and firms with political ties may receive more subsidies. Furthermore, firms with poor sales performance and in less marketized regions will be granted even more subsidies when uncertainty rises and firms are politically connected. We also observe that subsidies promote firms' fixed asset investments and innovations but decrease their overall investment efficiency.

Does CSR Governance Improve Social Sustainability and Reduce the Carbon Footprint: International Evidence from the Energy Sector

In today’s world, the energy sector is considered the backbone of any economy and plays a key role in carbon trading markets and mitigation actions. This study explores the impact of CSR governance on carbon footprints and the social performances of the energy sector. Using an international sample of 45 countries from 2002 to 2017, we find that the existence of a CSR committee improves the firm’s social responsibility and effectively mitigates the carbon footprint. Further, our results present that a large CSR committee with more experienced board members are effective to implement sustainable business practices. Furthermore, a CSR committee with experienced board members does not mitigate the environmental and social concerns, when energy firms have more powerful CEOs. Collectively, our evidence indicates that the existence of CSR governance is favorable to focus on social issues than environmental ones.

City networks binding resource peripheries to economic and political cores: a Northeast Asian perspective

ABSTRACT Under conditions of contemporary globalization and regionalization, economic connectivity is an increasingly important feature of Northeast Asia (NEA). Geographies of these connections and the role of NEA cities in the global and regional economies are increasingly variegated. This paper explores resource industries as landscapes of NEA integration in regional and global economies by focusing on the city networks of energy and mining firms. Using social network analysis (SNA) of the corporate headquarters-subsidiary relations, this paper provides a comparative study of spatialities of the NEA energy and mining city networks at different geographical scales. By distinguishing global, regional, and national scales of urban connectivity, the analysis identifies NEA cities that are strategic in linking resource extraction regions with centers of economic and political power. Based on the multiscale connectivity and SNA metrics, we draw a typology of gateway functions and discuss the positionalities of cities in NEA resources networks. By advancing the empirical understanding of NEA regional and global integration through strategic cities, this study establishes a case for the reframing of NEA as a region that is neither nationally-scaled nor geographically contiguous.

Regulatory policy and misallocation: A new perspective based on the productivity effect of cleaner production standards in China's energy firms

Based on a theoretical model, this study reveals that regulatory policy can impact two different types of total factor productivity (TFP) at both the firm and industry levels, namely the true/distorted TFP, calculated by the observed and distorted data, and the counterfactual/undistorted TFP, after correcting distortions. Then, using the difference-in-differences method, we investigate the impact of cleaner production standards on Chinese energy firms' TFP and resource allocation efficiency over the period of 2000–2007. The empirical results show that when resources are fully and effectively allocated, the distorted TFP of China's energy industry can be increased by 117%–491.6%. Although the regulations of cleaner production reduce the efficiency of resource allocation in the energy industry, it enhances two levels of firms' TFP. Heterogeneity analysis shows that these policies have a stronger impact on small and state-owned firms. This study suggests that policy evaluation should combine the changes in two levels of TFP and resource allocation.

The impact of extreme structural oil-price shocks on clean energy and oil stocks

This paper investigates the time frequency and quantile dynamics of the dependence among the stock prices of clean energy companies, the stock prices of oil & gas companies, and shocks to crude oil prices. This is the first empirical study to examine the extreme comovements (tail dependence) between the different sources of oil price shocks (oil supply shocks, aggregate demand shocks, and oil-specific shocks) and clean energy and oil & gas stock returns. Our methodology incorporates Baruník and Kley’s (2019) novel quantile cross-spectral dependence approach for the 2004–2019 period. The empirical results show that the effect of supply oil shocks on the returns of clean energy firms is concentrated mainly in the short-term horizon while the effect of aggregate demand shocks is mainly concentrated in the long and intermediate terms. Generally, the connection between aggregate demand shocks and clean energy is more important than the connection between supply shocks and clean energy, especially during the medium term. Additionally, the relation between oil shocks and oil & gas stock returns is direct or occurs mainly during normal time episodes and largely driven by oil demand-specific shocks. The dependence between the aggregate demand shocks and clean energy stock returns of normal quantiles is the highest in the medium term. Finally, oil supply shocks have a larger impact on oil & gas stock returns than on clean energy stock returns. These results have important practical implications for investors and policymakers interested in fossil fuel and renewable energy investments, especially if they have different time horizon preferences.

China's anti-corruption shock and resource reallocation in the energy industry

Abstract This paper explores the impact of anti-corruption on productivity and resource reallocation in China's energy industry. Using staggered anti-corruption investigations as exogenous shocks, we construct a quasi-natural experiment to identify causality. We find that China's anti-corruption shock improves the total factor productivity (TFP) of energy firms by 2.5%, and the impact is more pronounced in state-owned enterprises (SOEs) compared to non-SOEs. The mechanisms through which anti-corruption increases SOEs' TFP is to increase investment efficiency, improve corporate governance, and increase innovation outputs. Government subsidies and financial facilities are more efficiently allocated after China's anti-corruption shock.

The impact of investor attention during COVID-19 on investment in clean energy versus fossil fuel firms

The outbreak of the COVID-19 pandemic has had significant negative impacts on financial markets, including energy stock markets. However, recently proposed and implemented green recovery plans may mean that clean energy firms demonstrate better performance than fossil fuel firms after the pandemic. As more voices call for the update of clean energy, theory on investor attention suggests investors will pay more attention to the potential to invest in clean energy stocks. Using a sample period of eight weeks before and during the pandemic, we find that the negative impact of the outbreak on both clean energy and fossil fuel firms is more significant for fossil fuel firms. Our results further show that during the pandemic there have been improved returns for clean energy firms as a consequence of investor attention, but not for fossil fuel firms. Our findings provide empirical evidence for the advantages of green recovery schemes in influencing financial markets, especially for clean energy stocks. These results suggest there are benefits for further promotion and implementation of green recovery stimulus measures post-pandemic.

Bridging production factors allocation and environmental performance of China’s heavy-polluting energy firms: The moderation effect of financing and internationalization

This study extends our understanding of the production factors allocation and environmental performance relationship by considering the moderation effect of financing and internationalization with China’s heavy-polluting energy firms as sample due to their significant impact on climate change, substantial contribution to boom of industrial sectors, and distinctive governance structures. We focus on five types of production factors, i.e. capital (asset-liability ratio), labor (production-typed staff size), technology (R&D intensity), information (inventory size), and institution (state-holding size) factors. Our analysis indicates that lower asset-liability ratio, lower R&D intensity, lower inventory, and higher state-holding significantly enhance environmental performance, while the degree of internationalization has a significantly negative influence on environmental performance. It can be also concluded that financing (as a capital “introduction” strategy) and internationalization (as a market “going-global” strategy) can enhance the effect of slack production factors on environmental performance, i.e. reducing the waste of slack resources. Heterogeneity test shows that higher degrees of financing and internationalization more significantly enhance the contribution of slack production factors to environmental performance than that of lower degrees. Our findings have key implications, particularly for heavy-polluting energy firms of emerging markets, in reasonably deploying production factors to achieve environmental improvement by attracting financing and global markets.

Asymmetric connectedness and dynamic spillovers between renewable energy and rare earth markets in China: Evidence from firms’ high-frequency data

The accelerating pace of energy use transition towards renewable energy worldwide has triggered the amplification of the demand for rare earths. This paper aims to explore the risk transfer between renewable energy and rare earth markets from the perspective of firms. The intention is motivated by the observation that significant investments regarding renewable energy are projected for the future and rare earths have emerged as an investment vehicle. By applying the DY (Diebold and Yilmaz) index onto high-frequency data, this paper sheds light on the connectedness between new energy and rare earth markets at firm level. Empirical results show that moderate volatility spillovers exist between these two markets in China. The risk transfer between firms in renewable energy and rare earth markets is also delineated in the form of network connectedness. The magnitude of risk transfer among firms may alter and the structure of risk transfer has seen shifts of focuses among firms over time. Furthermore, using the method of spillover asymmetric measure, pessimistic mood is detected in both markets during most of the period from 2012 to 2020, which indicates a lack of confidence and efficiency in the financing channel of stock. Compared with the existing literature, this article provides a finance-oriented exploration between these two markets using high-frequency data and a detailed illustration at firm level, which may help inform the decision-making for stakeholders.