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Perception of economic policy uncertainty and peer effects in capital structure

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  • Li, Li
  • Pan, Changchun
  • Zhang, Mingrui

Abstract

Amid escalating global economic policy uncertainty (EPU), firms' perceptions of and responses to EPU at the corporate level critically impact market stability and allocative efficiency. In light of this, this study employs panel data from Chinese listed companies over the period 2007–2023 to empirically investigate the influence of perceived economic policy uncertainty (PEPU) on the industry peer effects within corporate capital structure. The findings indicate that elevated PEPU significantly strengthens these peer effects. Mechanism analysis indicates that PEPU enhances peer effects in capital structure by intensifying motives for information acquisition and risk avoidance. Cross-sectional analysis further reveals that the amplifying role of PEPU in peer effects related to capital structure is more evident in firms operating in regions with advanced marketization, industries with greater competition intensity, management teams with weaker financial backgrounds, and firms facing lower financing constraints.

Suggested Citation

  • Li, Li & Pan, Changchun & Zhang, Mingrui, 2026. "Perception of economic policy uncertainty and peer effects in capital structure," Pacific-Basin Finance Journal, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:pacfin:v:98:y:2026:i:c:s0927538x26001162
    DOI: 10.1016/j.pacfin.2026.103170
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