Uncertainty of fiscal policy and corporate leverage decisions

We explore the impact of fiscal policy uncertainty (FPU) on corporate leverage in the context of Chinese firms. The analysis reveals a significant negative association between FPU and leverage, consistent across various leverage measures. Additionally, trade credit, financial distress risk, state ownership, and nonlinear dynamics significantly influence this relationship. These findings offer new insights into the effects of fiscal uncertainty on corporate leverage, highlighting the broader implications for corporate financial strategies.