How does economic policy uncertainty affect corporate debt maturity?

Arbeitspapier

This paper investigates whether and how economic policy uncertainty affects corporate debt maturity. Using a cross-country firm-level dataset for France, Germany, Spain, and Italy from 1996 to 2010, we find that an increase in economic policy uncertainty is significantly associated with a shortened debt maturity. Specifically, a 1% increase in economic policy uncertainty is associated with a 0.22% decrease in the long-term debt-to-assets ratio and a 0.08% decrease in debt maturity. Moreover, the impacts of economic policy uncertainty are stronger for innovation-intensive firms. We use firms' flexibility in changing debt maturity and the deviation to leverage target to gauge the causal relationship, and identify the reduced investment and steepened term structure as transmission mechanisms.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IWH Discussion Papers ; No. 6/2020

Classification and Topics

• Classification: Wirtschaft ; Criteria for Decision-Making under Risk and Uncertainty ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Subject: economic policy uncertainty ; debt maturity ; capital structure ; corporate investment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Li, Xiang ; Su, Dan
• Event: Veröffentlichung
• (who): Halle Institute for Economic Research (IWH)
• (where): Halle (Saale)
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/216815
• URN: urn:nbn:de:101:1-2020071510474068900192
• Last update: 10.03.2025, 11:42 AM CET