The Impact of Economic Policy Uncertainty on Corporate Capital Structure
DOI:
https://doi.org/10.62051/1gs5nd47Keywords:
Economic policy uncertainty, Baker Index, Capital structure, Leverage ratio.Abstract
Rising economic policy uncertainty has become a defining feature in China and globally in recent years. This paper reviews and synthesizes relevant literature on economic policy uncertainty and its impacts. Using the Baker Index as a measure of economic policy uncertainty and selecting Shanghai and Shenzhen A-share listed companies as the sample, it empirically examines the effects of economic policy uncertainty on corporate capital structure.Employing panel regression for benchmark analysis, the study further validates its conclusions through robustness tests and conducts in-depth mechanism analysis. Findings reveal that heightened economic policy uncertainty leads to reduced corporate leverage. Specifically, this uncertainty lowers leverage by increasing cash holdings, reducing operational risk, and strengthening financing constraints.
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