LAUSR

Abstract We examine the relationship between oil prices and corporate investment, conditional on market conditions. Using 27,981 firm-year observations covering 2814 listed firms from 2000 to 2018, we find that, on the whole, oil prices are negatively correlated with corporate investment expenditure. This oil price–investment relationship changes when market conditions are taken into account. When market conditions are unfavorable, the relationship remains the same. However, when market conditions are favorable, corporate investment expenditure increases as oil prices rise. We further consider the impact of industry competition and initial corporate investment status. The results suggest that industry competition strengthens the positive impact of oil prices and market conditions on corporate investment expenditure, and that over-investing companies are more sensitive to the impact of oil prices and market conditions. Our results are robust to alternative key variables and samples.