Economic policy uncertainty and debt allocation within business groups

Yuqiang Cao, Chenglin Li, Xinghe Liu*, Meiting Lu, Yaowen Shan

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

6 Citations (Scopus)


A business group operation, as a strategic organizational form, is critical for corporate development. However, how business groups allocate their debt between parent and subsidiary companies remains an unexplored issue. This study explores the impact of economic policy uncertainty (EPU) on debt allocation within business groups. In theory, when business groups encounter high EPU, they can choose either a centralized or a decentralized debt structure. We find that Chinese business groups under EPU tend to choose centralized borrowing, especially for non-state-owned enterprises and business groups with low-quality internal controls and volatile profitability. Our findings highlight the significance of EPU in determining the allocation of decision rights within business groups.

Original languageEnglish
Article number106021
Pages (from-to)1-9
Number of pages9
JournalEconomic Modelling
Publication statusPublished - Nov 2022


  • Business groups
  • Centralized versus decentralized borrowing
  • Debt allocation
  • Economic policy uncertainty


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