A Sudy Of The Impact Of Monetary Policy And Its Uncertainty On The Corporate Capital Structure

The decision-making of capital structure concerns important factors involving financing costs as well as enterprise risks, and determines the firm value to a large extent. It is one of the most critical issues and research focuses in the realm of corporate finance. The vital role of macroeconomic factors play in the corporate investment and financing behavior has already been confirmed in recent literature. However, the issue of how macroeconomic policies act on the behavior of microeconomic body has not been resolved in documents in the field of finance.As one of the most important policies, monetary policy will explicitly affect corporate financing cost and restrict the financing scale. The risks brought about by the monetary policy uncertainty will give rise to the volatility of credit scale and interest rates, impact the corporate anticipation for the future investment and financing environment. Therefore, studying the influences of monetary policy and its uncertainty on corporate financing behaviors, we can not only distinctly understand the micro effects of macroeconomic policy changes, but also unambiguously capture the macro factors that affect corporate financing behaviors.Based on the particular practice of monetary policy in China, this paper makes a distinction between quantitative and price-based monetary policies and establishes relevant hypotheseses, to examine the influence of the two types of policies and their uncertainties on corporate capital structure and debt maturity structure as well as the channels through which the impacts take place. Taking the Chinese A-share listed companies as the research object, this paper uses quarterly data from the first quarter of2003to the fourth quarter of2012and fully considers the robustness of the results. The findings show that,(1) both quantitative and price-based monetary policies will have an effect upon corporate capital structure, but have no significant influence on the debt maturity structure. Tight (expansionary) price-based monetary policy will lower (heighten) companies’ debt ratio, while tight (expansionary) quantitative monetary policy will heighten (lower) companies’ debt ratio.(2) The impacts of quantitative monetary policy uncertainty on the corporate capital structure and debt maturity structure are both insignificant, but the price-based monetary policy uncertainty does affect corporates’ asset-liability ratio and debt maturity structure. The greater (smaller) the uncertainty, the higher (lower) the asset-liability ratio, the more (less) short-term and less (more) long-term debt in total debt.(3) There is heterogeneity in the impacts of monetary policy and its uncertainty on corporate capital structure and debt maturity structure. The effects vary in different economic cycles. And the influences are asymmetric between large and small firms as well.(4) Monetary policy and its uncertainty will exert an influence on corporate capital structure and debt maturity structure through the channel of commercial credit.The lesson derived from the study is that, on account of the significant effect of the price-based monetary policy, China should keep on promoting the interest rate liberalization reform and put more emphasis on the regulation methods in which price-based policy dominates. In view of the heterogeneity of the impact of the monetary policy, the policy making is supposed to take the impacts of macro environment and micro features into consideration to formulate monetary policies with otherness. Companies ought to fully appreciate the significant influence of monetary policy and macroeconomic environment on corporate investment and financing, and combine the direction and trend of monetary policy with the macro environment, to make timely adjustments to their capital structure and debt maturity structure.