Economic Policy Uncertainty and Corporate Leverage Ratio: Evidence in China

DOI

10.2991/assehr.k.211209.542How to use a DOI?

Keywords

Economic policy uncertainty; leverage; debt ratio

Abstract

In the context of the current unstable macroeconomic environment, we explored the impact of economic policy uncertainty on the corporate leverage ratio. The study found that economic policy uncertainty significantly reduces firm leverage ratios. This relationship holds significantly after a series of robustness tests, supporting the point of risk aversion among corporate executives. Meanwhile, we found that firms are more inclined to reduce their short-term debt levels since short-term debts induce a greater liquidity risk for firms. Furthermore, we found that economic policy uncertainty affects firms’ behavior of reducing their leverage ratio mainly in non-state-owned enterprises and firms not audited by the Big Four auditors. This paper has a certain reference significance for the enterprise’s risk-related decision-making under the current macroeconomic environment.

Copyright

© 2021 The Authors. Published by Atlantis Press International B.V.

Open Access

This is an open access article under the CC BY-NC license.

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TY  - CONF
AU  - Yuxin Huang
PY  - 2021
DA  - 2021/12/15
TI  - Economic Policy Uncertainty and Corporate Leverage Ratio: Evidence in China
BT  - Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)
PB  - Atlantis Press
SP  - 3333
EP  - 3342
SN  - 2352-5428
UR  - https://doi.org/10.2991/assehr.k.211209.542
DO  - 10.2991/assehr.k.211209.542
ID  - Huang2021
ER  -