Research On The Influence Of Economic Policy Uncertainty On Enterprise Leverage

In recent years,China has achieved numerous historic milestones in its economic development despite facing various challenges and opportunities.To pursue high-quality economic growth,the country has implemented supply-side structural reforms.Moreover,the Belt and Road Initiative,a multilateral cooperation mechanism,has garnered global recognition and appreciation.Meanwhile,China has also faced several international emergencies,including the Sino-US trade war,the COVID-19 pandemic,and the RussiaUkraine conflict,which have adversely affected its economic development.To mitigate their impact,the Chinese government has introduced and revised relevant economic policies to maintain overall stability,albeit at the cost of increased policy uncertainty.Moreover,the2015 financial crisis brought to light the dangers of excessive corporate leverage.As a result,reducing the excessive leverage of Chinese enterprises has become a crucial aspect of the country’s economic development since the implementation of supply-side structural reforms.This paper aims to investigate the impact of economic policy uncertainty on corporate leverage by combining macroeconomic policies and micro-level corporate leverage data,along with newspaper keywords.The study selected four provinces(Beijing,Shanghai,Guangdong,and Zhejiang)based on their market capitalization and number of listed companies,which totals over 2,000,in line with China’s geographical characteristics.The study period covers the years 2018 to 2021.This study shows that: first,economic policy uncertainty plays a catalytic role in reducing corporate leverage;second,the impact of economic policy uncertainty shows significant differences among different types of enterprises,specifically on private enterprises and small and medium-sized enterprises;third,industry heterogeneity analysis reveals that economic policy uncertainty has a more significant impact on secondary industries,such as real estate and manufacturing,than tertiary industries,represented by information technology services.Third,the industry heterogeneity analysis finds that economic policy uncertainty affects secondary industries such as real estate and manufacturing more significantly than tertiary industries represented by information technology services,while the impact on manufacturing is mainly reflected in non-labor-intensive industries;fourth,this paper investigates the impact mechanism through mediating effects,and the results show that economic policy uncertainty affects corporate leverage through two channels,specifically by promoting corporate financialization and inhibiting corporate risk-taking.Finally,to ensure the reliability of the obtained results,the main regression analysis and the mediating effect analysis parts of this paper are tested for robustness,and the research findings are robust.These research findings provide practical references for relevant departments,guide Chinese enterprises to reduce leverage scientifically,and provide targeted assistance in identifying corporate difficulties to ensure the overall stability of China’s economic growth.