Monetary Policy, Fiscal Policy, and Capital Structure Dynamic Adjustment: Evidence from Chinese Listed Companies

Abstract

Monetary and fiscal policies are important means of macroeconomic regulation by the Chinese government, and their combination is an important guarantee for the stable development of economy. We analyze the impact of monetary and fiscal policies on capital structure adjustment and empirically test the data of Chinese nonfinancial listed companies in A-share market from 2000 to 2020. The research shows that, under the loose monetary policy and expansionary fiscal policy, enterprises will adjust their capital structure upward, improve their asset-liability ratio, and speed up their capital structure adjustment. In addition, the speed of capital structure adjustment of enterprises with low financing constraints is faster than that of enterprises with high financing constraints.