Carbon risk and corporate maturity mismatch

Ming Huang, Xiaoxiao Wang, Xuewu Wang and Qunzi Zhang

Journal of International Money and Finance, 2024, vol. 149, issue C

Abstract: This study investigates the impact of carbon risk on the corporate maturity mismatch of investment and debt. We find that carbon risk exacerbates maturity mismatches, primarily by increasing debt default risk, which in turn reduces both the availability and maturity of bank loans. At the same time, carbon risk drives firms to undertake riskier investments, compelling them to rely more heavily on short-term financing to support long-term projects. Heterogeneity analysis reveals that the impact of carbon risk on maturity mismatch is more pronounced in firms that are smaller in size, exhibit weaker financial performance, have higher leverage, hold less cash, or engage in less green innovation. Moreover, under heightened carbon risk, increased maturity mismatch appears to reduce agency costs and enhance firm performance, thereby improving resource allocation. This finding supports the monitoring role of maturity mismatch. Our results remain robust across multiple sensitivity tests.

Keywords: Carbon risk; Corporate maturity mismatch; Default risk; Monitoring effects (search for similar items in EconPapers)
JEL-codes: G31 G32 Q51 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:149:y:2024:i:c:s0261560624002006

DOI: 10.1016/j.jimonfin.2024.103213

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