The Impact Of Economic Policy Uncertainty On Corporate Leverage Ratio

After the financial crisis in the United States in 2008,economic uncertainty has been increasing,and governments have frequently adjusted their economic policies to overcome the crisis and stabilize the level of economic development.China is no exception,such as the "quadrillion" plan and interest rate cuts.Since then,China has implemented a series of policies such as "Internet + supervision","double cycle","tax and fee reduction","six stable and six guaranteed","deepening the reform of management and service",etc.,to deal with the difficulties and challenges encountered in the process of promoting highquality economic development.Increasing economic policy uncertainty can have an impact on corporate financing decisions and thus on the aggregate and structural quality of corporate leverage while promoting industrial restructuring and guiding high-quality economic development.And leverage is a double-edged sword,which may bring both high returns and high risks to enterprises,and leverage has an amplifying function for both returns and risks.In particular,when leverage is uneven across different types of firms,it may lead to a mismatch of financial resources at the expense of total factor productivity.How to deleverage and optimize the leverage of different types of enterprises better,that is,optimize the leverage structure,is an important part of the "fight to prevent and resolve financial risks".Based on the Chinese economic policy uncertainty index(EPU index)constructed by Shangqin Lu and Yun Huang(2019),this thesis analyzes the impact of economic policy uncertainty on the aggregate and structure of corporate leverage using regression analysis of micro panel data from 2010 to 2020,and then investigates how to optimize the allocation of corporate leverage in the face of economic policy uncertainty as an external shock to promote the improvement of total factor productivity in society and high-quality economic development.The main conclusions from the empirical analysis are as follows:first,in aggregate,economic policy uncertainty has a dampening effect on the level of corporate leverage ratio.For each percentage point increase in economic policy uncertainty,the level of corporate leverage decreases by 0.012 percentage points.Second,the degree of structural differentiation of the corporate leverage ratio increases due to economic policy uncertainty,i.e.,there are significant ownership,size,and regional differences in the above inhibitory effects.Specifically,this negative effect is mainly reflected in the non-state,emerging small-scale and eastern region enterprises that play a pivotal role in high-quality economic development,reducing the high-efficiency "good leverage",more uneven distribution of financial resources,resulting in more serious resource mismatch,weakening the deleveraging policy effect,but also not conducive to the improvement of economic efficiency.Finally,considering that economic policy uncertainty can exacerbate financial resource misallocation,and based on the results of the empirical analysis,this thesis proposes the following recommendations in order to minimize economic policy uncertainty,mitigating the negative impact of economic policy uncertainty corporate leverage,avoid the leverage of economic efficiency from being squeezed out by the leverage of economic inefficiency,promote smooth deleveraging,and optimize the leverage structure:(1)maintain moderate stability of economic policies and strengthen forward-looking guidance to reduce potential economic policy uncertainties;(2)pay attention to the structural characteristics of leverage ratio and achieve differentiated deleveraging as well as efficient superior leverage to mitigate the impact of economic policy uncertainties on the structural differentiation of leverage ratio;(3)deepen financial market reforms,add more financing channels to improve the business financing environment;(4)enterprises raise risk awareness and take effective measures to enhance their ability to withstand the impact of economic policy uncertainties.