Perception of Economic Policy Uncertainty and Corporate Leverage Manipulation: Microlevel Evidence From Listed Firms in China

ABSTRACT Leverage manipulation refers to firms' discretionary adjustments of reported leverage to influence financing conditions. Using data from A‐share listed companies in China from 2010 to 2023, this study employs text mining techniques to extract relevant textual content from corporate annual reports and construct firms' perception of economic policy uncertainty (FEPU), examining its impact on corporate leverage manipulation. We find that firms significantly increase their leverage manipulation in response to heightened FEPU. Mechanism analyses suggest that firms' debt service burden positively moderates the relationship between FEPU and leverage manipulation. Further heterogeneity analyses reveal stronger effects for state‐owned enterprises, firms with weaker internal controls, those experiencing greater financing constraints, firms in highly competitive industries, and companies located in regions with lower marketization levels. Regarding economic consequences, although leverage manipulation may temporarily mask financial risk and sustain financing capacity, it ultimately constrains credit access and increases operational instability, elevating the risk of organizational decline. This study contributes to the literature on economic policy uncertainty and corporate financial manipulation and offers policy implications for designing more effective deleveraging frameworks.