Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/216815
Authors: 
Li, Xiang
Su, Dan
Year of Publication: 
2020
Series/Report no.: 
IWH Discussion Papers 6/2020
Abstract: 
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.
Subjects: 
economic policy uncertainty
debt maturity
capital structure
corporate investment
JEL: 
D81
G32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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