Research On The Relationship Between Economic Policy Uncertainty And Corporate Debt Financing Cost

The 2008 financial crisis plunged the global economy into a sustained downturn,and major economies around the world suffered heavy losses.In order to curb the downward trend of the economy and promote economic recovery,countries and major economies around the world have introduced a series of economic policies to mitigate the adverse effects of the economic crisis.As countries issue a series of policies to alleviate the economic crisis,academia has also begun to attach importance to the study of economic policy uncertainty and pay attention to its impact on economic growth.China is currently in a transition period from high-speed growth to high-quality growth.In order to ensure the smooth operation of the national economy during the economic transition period,the government has intervened in the market through various economic policies,further triggering the swing in the direction of economic policy,increasing the overall uncertainty of economic policy.The uncertainty of economic policy mainly affects the cost of debt financing for enterprises from the perspectives of supply and demand.From the perspective of supply,banks,as the main bearers of corporate debt financing,when faced with the impact of economic policy uncertainty,will choose to extend loans or increase the strength of loan approval,placing higher requirements on the quality of collateral and the yield of debt,increasing the difficulty for enterprises to obtain debt financing.From the perspective of demand,in the face of the impact of economic policy uncertainty,enterprises’ own profitability has decreased,and their internal financing supply is insufficient.They hope to maintain more liquidity to cope with risks,and tend to obtain funds through external financing,raising the cost of corporate debt financing.Economic policy uncertainty can also have an impact on the cost of debt financing for enterprises through specific segmentation areas,such as monetary and fiscal perspectives.With the development of China’s financial market,more and more enterprises allocate financial assets through financial market operations to alleviate liquidity shortages and even speculate in the financial market.At the same time,the problems brought about by enterprise financialization have received widespread attention.When faced with the impact of economic policy uncertainty,the excessive allocation of financial assets by enterprises will be curbed,which to some extent increases some liquidity for enterprises and alleviates the cost of debt financing for enterprises.When investing,enterprises should focus on the reversibility of assets.With strong reversibility of assets,enterprises can better cope with the impact of economic policy uncertainty and save debt financing costs.There are significant differences in the cost of corporate debt financing affected by uncertain shocks for enterprises with different property rights and enterprise sizes,as well as similar differences in the level of corporate financialization and asset reversibility.This article uses the economic policy uncertainty index constructed by Baker(2016)to match the data from the corporate financial statements of A-share listed companies in Shanghai and Shenzhen stock markets from 2010 to 2020 at an annual level.Firstly,the empirical facts about the relationship between economic policy uncertainty and corporate debt financing costs are analyzed.Then,use the obtained relevant data to construct a regression model,and respectively add corporate financialization and asset irreversibility to analyze the regulatory effect.Finally,in order to make the empirical results more convincing,a heterogeneity analysis based on the nature of property rights and the size of enterprises was conducted.The conclusions are as follows:(1)There is a positive correlation between economic policy uncertainty and corporate debt financing costs.(2)Corporate finance plays a negative regulatory role in the relationship between economic policy uncertainty and corporate debt financing costs.(3)Asset reversibility plays a positive regulatory role in the relationship between economic policy uncertainty and corporate debt financing costs.(4)The relationship between economic policy uncertainty and corporate debt financing costs shows differences due to the nature of property rights,while non-state owned enterprises’ debt financing costs are more affected by economic policy uncertainty.(5)The relationship between economic policy uncertainty and corporate debt financing costs shows differences due to the impact of enterprise size,while the impact of economic policy uncertainty on the debt financing costs of small-scale enterprises is stronger.In order to verify the empirical results,the methods of replacing the explanatory variable,replacing the explained variable,lagging the variable for one period,and instrumental variable methods were used to conduct a robustness test.And from the perspectives of government,banks,and enterprises,suggestions are given to alleviate the impact of economic and political uncertainty on the cost of corporate debt financing.