ECONOMIC POLICY UNCERTAINTY IN BRAZIL AND THE COST OF DEBT OF BRAZILIAN COMPANIES
DOI:
https://doi.org/10.51320/rmc.v25i2.1540Keywords:
conomic Policy Uncertainty, Cost of Debt, Cost of CapitalAbstract
Corporate financial decisions have been affected by the uncertainty of economic policy, but the effects of this uncertainty on debt financing costs remain largely unexplored in the literature. Therefore, the objective of this study was to analyze the effects of economic policy uncertainty on the cost of debt for publicly listed companies in the Brazilian stock market. Methodologically, it was employed panel data regressions using feasible generalized least squares, aiming to assess the responses in the cost of debt for companies based on changes in economic policy uncertainty. The sample consisted of publicly listed companies on B3, with data from 2010 to 2021. Two variables were used to assess economic policy uncertainty: the Economic Policy Uncertainty indicator and the Economic Uncertainty Indicator - Brazil. The results allowed concluding that economic policy uncertainty positively influences the corporate debt cost for the sample companies. These results remain robust when using lagged control variables. Therefore, the findings of this study may suggest that corporate managers should avoid undertaking significant debt volumes during periods of higher economic policy uncertainty to attempt to reduce debt costs during these periods. Additionally, the results of the study also indicated that in periods of economic crisis there is an increase in the cost of debt, while during the COVID-19 pandemic period reductions were found, demonstrating changes in debt cost during different crises.
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