Financial mismatch on corporate debt default risk: Evidence from China

Wang Zhitao and Ma Xiang

Pacific-Basin Finance Journal, 2023, vol. 80, issue C

Abstract: The continuous spread of debt default has caused huge losses for investors and the capital markets. Using data from Chinese A-share listed companies from between 2014 and 2021 as a sample, we study the impact of financial mismatches on corporate default risk and its mechanisms. We find that financial mismatching is significantly positively associated with default risk. A mechanism test reveals that financial mismatching aggravates corporate default risk by increasing inefficient investments. Further analysis shows that the positive association is more prominent in non-state-owned entities (SOEs) and firms with fewer government subsidies, lower profitability, and more financial constraints. We provide a reference for deepening supply-side structural reforms and preventing and resolving a major risk faced by firms.

Keywords: Financial mismatching; Inefficient investments; Default risk (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:80:y:2023:i:c:s0927538x23001439

DOI: 10.1016/j.pacfin.2023.102077

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