Monetary policy uncertainty and corporate credit financing in China: The role of accounting information quality

Abstract

Although existing studies confirm that monetary policy uncertainty (MPU) affects firms' credit financing behaviors, limited knowledge exists about the strategies that firms use to mitigate its adverse effects. This study examines how MPU influences corporate credit financing and analyzes the mediating effect of accounting information quality, using data from China's A-share nonfinancial listed firms from 2007 to 2022. The empirical results show that an increase in MPU significantly reduces corporate credit financing, particularly short-term loans. MPU drives this decline through two potential channels, namely, asset tangibility and financing costs. Furthermore, our analysis shows that high-quality accounting information mitigates the adverse effect of MPU on corporate credit financing. This finding suggests that firms can strengthen their external financing capabilities by improving the quality of information disclosures, especially when MPU increases.