Does international oil price risk affect the corporate propensity to save? Evidence from China

Using a sample of Chinese listed firms from 2003 to 2019, this study examines how international oil price risk influences corporate propensity to save in China's emerging and transition economy. We proxy the propensity to save with cash–cash flow sensitivity and employ a dynamic multi-equation model to capture the interdependence and intertemporal nature of financial decisions. The results show that oil price risk reduces firms' propensity to save, supporting the financial constraints argument. This negative effect is stronger for non-state-owned enterprises, indicating that financial constraints are more binding for these firms. Furthermore, the relationship between oil price risk and cash–cash flow sensitivity is significant only after the 2008 reform of refined oil pricing, when marketization deepened. Robustness checks confirm these findings. Additional heterogeneity analyses reveal that the effect is more pronounced among firms with low investment opportunities and high leverage. Overall, this study contributes to the understanding of how external commodity price uncertainty shapes corporate cash-holding strategies under varying financial and institutional conditions.