Research On The Impact Of Economic Policy Uncertainty On The Cost Of Enterprise Equity Financing

After the 2008 global financial crises,around the world,governments have strengthened the control of the financial market and the real economy to avoid economic recession.China has also adopted a series of active economic policies to maintain financial market stability for the development.Now,China’s economic transformation and the complex and changeable international situation abroad lead to frequent changes in the economic policy and also expand the danger of economic policy uncertainty.In order to maintain production activities and expand their business scope,enterprises need to carry out financing activities.More and more enterprises will tend to adopt equity financing in the choice of financing methods.Equity financing cost,as one of the important factors affecting the behavior of enterprise equity financing,is not only related to the business operation of enterprises,but also related to external macro factors.For this reason,this paper will explore the influence on the equity financing cost of companies from the perspective of economic policy uncertainty of macroeconomic factors,the two indicators of investor sentiment and cash holding are introduced to further analyze its intermediary and regulating role in the mechanism of economic policy uncertainty on the impact of equity financing cost of enterprises.At present,the existing literature studies the combination of economic policy uncertainty,investor sentiment and enterprise equity financing cost.Most of the existing literature only discusses the impact of economic policy uncertainty on enterprise equity financing costs,without considering investor sentiment,or mostly only discusses the impact of investor sentiment on enterprise equity financing costs,without considering the external macroeconomic factor of economic policy uncertainty..Therefore,based on the above research background,this paper first analyzes the impact mechanism of economic policy uncertainty on enterprise equity financing cost from the two channels of macro-economy and capital market;Secondly,based on information asymmetry theory,cognitive bias theory and noise trading theory,this paper analyzes the intermediary role of investor sentiment in the impact mechanism of economic policy uncertainty;Then,it analyzes the regulatory role of cash holdings in the impact mechanism of economic policy uncertainty from the two dimensions of risk and market;Finally,based on the agency cost theory,this paper analyzes the differences in the influence mechanism of enterprises with different property rights.This paper selects the listed companies from 2010 to 2018 as the research sample,uses the MPEG model to calculate the enterprise equity financing cost,selects the economic policy uncertainty index constructed by Baker as the index to measure the economic policy uncertainty,and selects the two-way fixed effect model for empirical research.Firstly,it studies the direct impact of economic policy uncertainty on the cost of equity financing;Secondly,the intermediary effect test model is used to test the intermediary role of investor sentiment in the transmission mechanism of economic policy uncertainty on enterprise equity financing cost;Then it studies the regulatory role of corporate cash holdings in its impact mechanism;Then it analyzes the influence mechanism and transmission path of economic policy uncertainty on the equity financing cost of enterprises with different property rights;Finally,the robustness test is carried out.The empirical results show that: first,the rising uncertainty of economic policy increases the cost of equity financing.Second,the rise of economic policy uncertainty has led to negative sentiment among investors,and the downturn of investor sentiment has further exacerbated the increase of equity financing costs of enterprises.Third,the cash holding of enterprises can effectively alleviate the adverse impact of economic policy uncertainty on the cost of equity financing.Fourth,when the risk of economic policy uncertainty increases,the impact of equity financing cost of non-state-owned enterprises is more sensitive and the mitigation effect brought by cash holding is more significant.According to the research conclusions of this paper,the following suggestions are made for the government,enterprises and investors: first,the government needs to consider comprehensively the economic policy,avoid frequent changes in the policy,improve and improve the relevant regulatory mechanism,and maintain the stability of market order;Secondly,when facing uncertain risks,enterprises should improve their hardware strength,reduce investor panic and avoid the rise of financing costs;In addition,investors should improve their professional quality and judgment ability and reduce irrational investment.