Influence Of Money Market Uncertainty On Corporate Capital Structure

In recent years,studies on corporate capital structure lays more emphasis on the economic environment of corporations.And economic environment can become uncertain under various influence of economic mechanisms and policies.Existing literature mostly focuses on the uncertainty of economic policies.However,there must be a channel through which policy uncertainty can affect firms.A main factor of corporate capital structure is the cost to financing,including debt cost and equity cost Because firms in China rely heavily on banks to get access to debt financing,money market,which is directly related to bank credit,becomes vital.And equity financing is closely related to capital market,which is influenced by money market as well.Therefore,it is necessary to test how uncertainty affects corporate capital structure through channels such as money market.The study on the mechanism of the influence of uncertainty on corporate capital structure is the main contribution of this thesisThis thesis studies the influence of money market uncertainty corporate capital structure based on Shanghai-and Shenzhen-listed companies.I use annual report data between 2007 and 2018 and find that money market uncertainty has significant negative influence on corporate capital structure.Furthermore,it significantly decreases long-term debt asset ratio but insignificantly raises short-term debt asset ratio.It also significantly intermediates the relation between cost to financing and capital structure:money market uncertainty depresses firms'equity cost,which stimulates their equity sizes and dilutes debt asset ratios.However,the intermediation effect does not exist significantly,as money market uncertainty does not have significant influence on firms' debt costs,though increases in debt costs would lift firms' debt asset ratios.To summarize,we know that rises in money market uncertainty cause firms use more equity financing instead of debt financing.I therefore suggest policymakers consider more on the firm-level economic mechanisms,and manage policy and market uncertainty properly.