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Financial mismatch on corporate debt default risk: Evidence from China

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  • Zhitao, Wang
  • Xiang, Ma

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.

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  • Zhitao, Wang & Xiang, Ma, 2023. "Financial mismatch on corporate debt default risk: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:pacfin:v:80:y:2023:i:c:s0927538x23001439
    DOI: 10.1016/j.pacfin.2023.102077
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