Policy-related risk and corporate financing behavior: Evidence from China's listed companies

摘要

Focusing on quarterly data of China's publicly-listed firms from 2013Q1-2017Q3, this paper presents an exploratory analysis of the causes of corporate financing behavior through the channels of firm-level characteristics, country-level factors, and policy-related risks. The analysis uses multidimensional measures of policy-related risks, including economic policy uncertainty, geopolitical risk, and political risk. In addition, we assess whether the correlations between policy-related risks and financing activities vary under different financing strategies such as debt financing and equity financing. We also examine how financial constraints and industry differences influence firm financing. The empirical findings indicate policy-related risks can negatively affect corporate financing decisions. The effect of policy-related risk is larger on debt financing than on equity financing. Evidence also reveals that both firm- and country-level factors are essential determinants that guide corporate financing decisions. Finally, the inhibitory influence of policy-related risk is larger for the two separate sub-samples of financially constrained firms and manufacturing firms. Knowledge of these impacts can help managers and policymakers to formulate more efficient strategies aimed at improving their economic performance.