Oil market volatility and foreign ownership: the case of Saudi Arabia

Abstract

Purpose This study aims to evaluate the resource curse hypothesis in an oil-dependent economy, Saudi Arabia, through examining the impact of oil price volatility on foreign ownership among Saudi listed firms. Design/methodology/approach The study analyzes a unique data set of firm-level data on foreign ownership for the period 2009–2015. A multivariate regression model was applied to analyze the relationships under study. Findings The analysis reveals a negative association between oil price volatility and foreign ownership in firms with high leverage and low stock volatility. Research limitations/implications Policymakers are encouraged to develop policies to control shocks in the supply and demand of oil and enforce economic diversification. Investors can better understand the dynamics of an oil-based economy stock market based on the investment behavior of foreign investors and their response to oil price shocks. Originality/value This study adds to the literature by analyzing the relationship understudy in an oil-rich and oil-dependent emerging economy, where its critical economic parameters are influenced by oil price volatility and it has the largest and the most liquid stock exchange in the MENA region.