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Economic Uncertainty and Firms’ Capital Structure: Evidence from China

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Listed:
  • Chenglin Gao

    (School of Management, Asian Institute of Technology, Khlong Luang, Pathum Thani 12120, Thailand)

  • Takuji W. Tsusaka

    (School of Environment, Resources and Development, Asian Institute of Technology, Khlong Luang, Pathum Thani 12120, Thailand)

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.

Suggested Citation

  • Chenglin Gao & Takuji W. Tsusaka, 2023. "Economic Uncertainty and Firms’ Capital Structure: Evidence from China," Risks, MDPI, vol. 11(4), pages 1-23, March.
    • Handle: RePEc:gam:jrisks:v:11:y:2023:i:4:p:66-:d:1108299
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    References listed on IDEAS

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