Economic policy uncertainty and capital structure choice: Evidence from China

Zhang, Guangli, Han, Jianlei, Pan, Zheyao and Huang, Haozhi (2015) Economic policy uncertainty and capital structure choice: Evidence from China. Economic Systems, 39 3: 439-457. doi:10.1016/j.ecosys.2015.06.003

Author Zhang, Guangli
Han, Jianlei
Pan, Zheyao
Huang, Haozhi
Title Economic policy uncertainty and capital structure choice: Evidence from China
Journal name Economic Systems
ISSN 0939-3625
Publication date 2015-09-01
Year available 2015
Sub-type Article (original research)
DOI 10.1016/j.ecosys.2015.06.003
Open Access Status Not Open Access
Volume 39
Issue 3
Start page 439
End page 457
Total pages 19
Place of publication Amsterdam, Netherlands
Publisher Elsevier
Collection year 2016
Language eng
Abstract This paper studies how economic policy uncertainty affects corporate capital structure for Chinese listed firms from 2003 to 2013. We show that as the degree of economic policy uncertainty increases, firms tend to lower their leverage ratios. However, firms that are from regions with lower degrees of marketization, are state-owned or have prior bank-firm relationships mitigate the negative effect of policy uncertainty. Moreover, we provide consistent evidence that this negative effect is sourced from the deterioration of the external financing environment. We also find that firms adjust their financing structures by using more trade credit when economic policy uncertainty increases. Our results are robust to sample selection, data frequency, model specification and endogeneity.
Keyword Economic policy uncertainty
Capital structure
Trade credit
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2016 Collection
UQ Business School Publications
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