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Who is Boosting to the Target Leverage in Economic Policy Uncertainty? Evidence from China

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  • Chen, Wenjie
  • Zhao, Hongyan
  • Chen, Juanjuan

Abstract

This study explores how economic policy uncertainty (EPU) and financing supply chain jointly affect the leverage adjustment decision of China firms. Using the estimated targets across the distribution, we conceive a research framework that allows EPU to interact with financing supply chain in dynamic panel regression models. Our result reveals that EPU and financing supply chain arejointly important in affecting firmʼs leverage adjustment. It also suggests theconditions that can beuse d to assist peopleto makequick judgment about whether firms will have strong intentions of adjusting leverage towards target. Moreover, we find some conditions can symmetrically affect above and below-target firmsʼ intentions of adjusting leverage.

Suggested Citation

  • Chen, Wenjie & Zhao, Hongyan & Chen, Juanjuan, 2022. "Who is Boosting to the Target Leverage in Economic Policy Uncertainty? Evidence from China," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 63(1), pages 86-103, June.
    • Handle: RePEc:hit:hitjec:v:63:y:2022:i:1:p:86-103
    DOI: 10.15057/hje.2022005
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    More about this item

    Keywords

    Economic policy uncertainty; Financing supply chain; Leverage adjustment; China;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance

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