Research On Adjustment Effect Of Enterprise Leverage Under Economic Policy Uncertainty

Chinese President Xi Jinping pointed out that economic globalization is an irreversible trend in historical development and we should conform to the laws of historical development actively and promote globalization towards a more open 、inclusive and win-win direction and let people of all countries share the fruits of economic globalization.However,the economic development of the world has fallen into a trough since the global economic crisis in 2008.For example,the lack of economic growth momentum,the Internet economic bubble,trade protectionism,subprime mortgage crisis,European debt crisis,unilateralism,anti-globalization trend.In order to resist the negative impact of the global economic crises on the domestic economy,many countries have issued a series of policies successively to promote the economy.These policies are conductive to stabilizing the economy,but increase the uncertainty of policy in the macroeconomic environment at the same time.Chinese government has also introduced a series of monetary and fiscal policies to promote the further development of our economy.These economic policies are conductive to China’s resistance to the global economic crisis and help China’s economy shift from a factor-driven development approach to efficiency and even innovation-driven development.However,it is difficult for companies to determine the timing,content,and impact of the government’s policies on the company.The government often relies on past information to formulate future policies,which leads to policies that are not perfect.If the frequency of policy is too high,it will easily lead to disorder in of the economic market.All these phenomena may exacerbate the uncertainty of our economic policies.Therefore,whether it is international or domestic,the uncertainty of economic policy is profoundly affecting the economic development of a country or region,and has attracted the attention of many scholars at home and abroad.After the2008 world financial crisis,scholars also paid attention to the problem of excessive corporate leverage.The Financial Policy Report of China released in 2017 shows that although the leverage ratio of China’s real economy sector is generally controllable,the structure is unevenly distributed.Compared with other countries in the world,the leverage ratio of China’s residential and government sector is reasonable,but the leverage ratio of the non-financial sector is too high.The Fifth Plenary Session of the Eighteenth CPC Central Committee began to pay attention to the issue of excessive leverage and proposed the requirement of de-leverage in October 2015.The Central Economic Work Conference at the end of 2015 also proposed to include de-leverage in the target system of supply-side reform.The national leasers pointed out that it is an important task clearly to reduce the leverage ratio of non-financial sector enterprises in China at the Central Economic Work Conference held in 2016.In 2017,Chinese President Xi Jinping emphasized that the relationship between “stable growth”,“structure adjustment” and “control total” should be handled well,especially we must solve the problem of high leverage in state-owned enterprises at the National Financial Work Conference.The leverage ratio of state-owned enterprises is the top priority of the work of reducing leverage.In 2018,the Central Financial and Economic Committee proposed to de-leverage structurally according to the actual situation of different departments and different types of debt.Local government debt and state-owned enterprises are the key targets for de-leveraging.Under the premise of ensuring the stability of macro leverage,the goal of reducing leverage will be gradually realized.Therefore,whether it is the uncertainty of economic policy or the “de-leverage” policy pursued by the state,it has an important impact on the survival and development of enterprises.Is it necessary to leverage? What are the ways to de-leverage? To what extent should the leverage be reduced? Companies need to clarify these three issues to achieve sustainable development.In this context,this paper takes the dynamic adjustment of enterprise leverage ratio under the uncertainty of economic policy as the research object,focusing on the following four aspects :(1)The analysis of the current situation of the leverage ratio of non-financial enterprises in China includes the analysis of the time series and structural characteristics of the development of the leverage ratio of non-financial enterprises in China.;(2)The analysis of the factors affecting the leverage ratio of China’s nonfinancial enterprises and their structural characteristics.;(3)The analysis of the impact of economic policy uncertainty on the leverage ratio of enterprises and its impact mechanism;(4)The analysis of the impact of corporate leverage on corporate performance,corporate debt risk,and corporate innovation.This paper uses the literature research method,comparative analysis method,mathematical modeling method and empirical research method to study the above questions deeply,and draws the following conclusions:(1)The current situation and influencing factors of leverage ratio of non-financial sector enterprises in China.(1)Among the total liabilities of the real economy sector,China’s non-financial sector enterprises have the largest debt scale and relatively high systemic risks.(2)Compared with the debt situation of non-financial sector enterprises in developed economies,the debt of non-financial sector enterprises in China has the characteristics of high burden and rapid growth.(3)Among the micro-influencing factors: asset turnover,size,non-debt tax shield and industry characteristics have a significant positive impact on corporate leverage;Profitability and growth have a significant negative impact on corporate leverage.Among the macro-influencing factors: the rate of GDP growth has a significant positive impact on corporate leverage;the real interest rates of America and investor risk aversion in the global market have a significant negative impact on corporate leverage.Macroeconomic variables can affect the corporate leverage directly and by affecting micro-variables indirectly.(2)The structural changes and influencing factors of the leverage of non-financial sector enterprises in China.(1)Before 2008,the leverage of private-owned enterprises was always higher than that of state-owned enterprises.However,the leverage of stateowned enterprises and private enterprises are deviated after 2008,showing a shape we called “reversal of leverage scissors”.(2)Affected by the financial crisis,China’s economic growth rate has begun to slow down and this has brought local governments pressure to stabilize economic growth.This study shows that the reversal of the leverage ratio scissors is mainly due to the active leveraging of SOEs caused by local government intervention in the financing needs of SOEs and Local governments’ increasing pressure to stabilize economic growth and economic policy uncertainty has also played a positive role in regulating the relationship between the pressure to stabilize economic growth and the reversal of the leverage ratio scissors.(3)The analysis of the mechanism of the impact of economic policy uncertainty on the adjustment of corporate leverage.(1)Economic policy uncertainty has a significant negative impact on corporate leverage and the speed of leverage adjustment and has a significant positive impact on the deviation between the actual leverage ratio and the optimal leverage ratio.(2)Economic policy uncertainty reduces the level of investment of enterprises by waiting options and financial friction channels;Economic policy uncertainty reduces the level of corporate debt financing by corporate uncertainty avoidance and financial intermediation uncertainty avoidance channels.Economic policy uncertainty has increased the scale of corporate equity financing,and this positive impact has been reinforced when stock prices are overvalued.(3)Corporate investment,corporate debt financing and corporate equity financing play a partial intermediary role in the process of economic policy uncertainty affecting corporate leverage.(4)The analysis of the effect of dynamic adjustment of leverage.(1)Corporate leverage has a significant negative impact on ROA,and has a significant positive impact on ROE.Economic policy uncertainty has exacerbated the negative impact of leverage on ROA and weakened the positive impact of leverage on ROE.(2)Corporate leverage ratio has a significant inverted U-shaped relationship with corporate innovation investment and innovation output and has a significant U-shaped relationship with corporate innovation risk.The above relationships are heterogeneous among firms of different sizes,different ownership properties,and different industries.Economic policy uncertainty strengthens the inverted U-shaped relationship between leverage ratio and corporate innovation input and innovation output,while economic policy uncertainty also strengthens the U-shaped relationship between leverage ratio and corporate innovation risk.(3)Corporate leverage has a significant positive impact on corporate debt risk,and the phenomenon of “short-term debt for long-term use” in China is positively regulating the above relationship.Corporate leverage has worsened the debt risk of corporate,under the influence of economic policy uncertainty.To summarize,this paper has some innovations as follows:(1)The existing literature describes the time series and structural characteristics of the change of the leverage ratio of non-financial enterprises in China,but it does not form a unified view on the reasons and mechanisms behind the formation of the structural characteristics of the leverage ratio of SOEs and private enterprises.Based on the slowdown of China’s economic growth after the 2008 financial crisis,this paper explores the reasons for the phenomenon we called “the reversal of leverage scissors” from the perspective of local governments’ increasing pressure to stabilize economic growth and deterioration of financing environment.It also considered the role of increasing uncertainty of economic policy after 2008 financial crisis.This paper links the macroeconomic environment to the structural changes in micro-enterprise leverage,forming a logical chain of “the slowing down growth rate of GDP-the increasing pressure of local governments to stabilize economic growth/ deterioration of financing environment-SOEs add leverage/private enterprises reduce leverage-the efficiency of fund allocation has declined-the rate of economic development has dropped more”.(2)In the past,the literature mainly focused on the impact of uncertainty on corporate investment and financing.There is less literature on the relationship between economic policy uncertainty and corporate leverage(adjustment).There is a lack of literature on the impact of economic policy uncertainty on corporate leverage from a dynamic perspective,and the literature about the impact of uncertainty on corporate leverage(adjustment)from the perspective of corporate investment and financing is even less.From the perspective of economic policy uncertainty,this paper not only discusses the impact of economic policy uncertainty on the level of corporate leverage,but also discusses the impact of economic policy uncertainty on the speed of leverage adjustment and the deviation between actual leverage and optimal leverage.At the same time,this paper also examines the mediating role of corporate investment and corporate finance in the relationship between economic policy uncertainty and corporate leverage.(3)Most of the existing researches focus on the analysis of the factors affecting the leverage ratio(adjustment)of the enterprise,and pay less attention to the impact of corporate leverage on the production and operation of the corporate in the process of the leverage adjustment.Based on the uncertainty of macroeconomic policy,this paper explores the impact of corporate leverage on firm performance,debt risk and innovation.At the same time,different from the previous literature,using enterprise R&D investment or patent quantity to measure enterprise innovation,this paper adopts three variables of innovation input,innovation output and innovation risk as the proxy variables of enterprise innovation.In other words,this paper also considers the risk of innovation when researching enterprise innovation.(4)This paper takes the data of all A-share companies in Shanghai and Shenzhen market in 1998-2018 as research sample,combined with relevant macroeconomic variables,using software of STATA15.0 to carry out the following research: factors affecting corporate leverage and structural characteristics;the impact of economic policy uncertainty on corporate leverage(adjustment)and its impact mechanism;the dynamic adjustment effect of enterprise leverage under the uncertainty of economic policy.