Sensitivity of the capital structure of oil and gas companies to environmental and pandemic factors

Abstract

Experts state that the market size of the worldwide oil and gas exploration and
production industry has diminished by 2.2% per year on average from 2016 to 2021. The results
of this study will show how companies can use the hidden potential of the balance sheet to stabilize
or even to improve their financial performance after a pandemic accompanied by green economy
trends. The purpose of this study is to identify optimal capital structure based on the analysis of
a relationship between capital structure and the company’s performance of the five top energy
sector companies listed on the New York Stock Exchange during the last five years. The analysis
was implemented based on correlation coefficient and regression analysis between performance
measurement indicators (ROE, ROA) and capital structure (leverage ratio). Except for this
main indicator, the research will also examine the relationship between age, profitability, and
capital structure. This study provides recommendations to increase the efficiency of a company’s
performance through its capital structure under current green economy trends and a pandemic
for company managers as well as investors.