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Political uncertainty and corporate debt financing: empirical evidence from China

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  • Miaochen Lv
  • Manying Bai

Abstract

We examine the influence of political uncertainty on corporate debt financing under the Chinese highly specialized political system. A new reasonable and effective alternative indicator, official turnover reason, is constructed to measure different political uncertainty level. Robust results suggest that listed companies will keep low debt financing level and smooth debt financing volatility under political uncertainty, which will be weakened during the global financial crisis. We also find that the listed company will raise equity financing level while overall financing is significantly reduced. In addition, SOEs are more sensitive to political uncertainty than non-SOEs, as they have stronger political connections with government officials.

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  • Miaochen Lv & Manying Bai, 2019. "Political uncertainty and corporate debt financing: empirical evidence from China," Applied Economics, Taylor & Francis Journals, vol. 51(13), pages 1433-1449, March.
    • Handle: RePEc:taf:applec:v:51:y:2019:i:13:p:1433-1449
    DOI: 10.1080/00036846.2018.1527455
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    Cited by:

    1. Worraphan Trakarnsirinont & Wisuttorn Jitaree & Wonlop Writthym Buachoom, 2023. "Political Uncertainty and Financial Firm Performance: Evidence from the Thai Economy as an Emerging Market in Asia," Economies, MDPI, vol. 11(1), pages 1-12, January.
    2. Faiza Ahmed & Tooba Jivani & Azam Anwar Khan, 2023. "Political Instability and Stock Market: An Event Study," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 9(2), pages 339-345.

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