Economic Uncertainty and Firms’ Capital Structure: Evidence from China

Chenglin Gao and Takuji Tsusaka
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Chenglin Gao: School of Management, Asian Institute of Technology, Khlong Luang, Pathum Thani 12120, Thailand

Risks, 2023, vol. 11, issue 4, 1-23

Abstract: This article assesses the effects of economic uncertainty on the corporate capital structure of Chinese-listed firms using a panel dataset of 1138 firms with A-shares traded on the Shanghai Stock Exchange and Shenzhen Stock Exchange for the period 2006–2020 and fixed-effect regression analysis. Economic uncertainty had a negative influence on Chinese firms’ debt ratios, especially for non-state-owned enterprises. Furthermore, firms’ leverage decreased on average during the 2008 Great Recession, whereas it increased during the 2018–2019 US–China Trade War and the 2020 COVID-19 pandemic. The findings provide quantitative evidence of the effects of economic uncertainty on the capital structure of firms in a transition economy.

Keywords: capital structure; debt level; economic uncertainty; panel regression; state-owned enterprise (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2023
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