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The impact of asset-liability maturity mismatch on stock returns: Evidence from China during 1998–2021

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  • Qiu, Muqing
  • Bai, Yunxia
  • Chen, Taoqin

Abstract

We examine the effect of asset-liability maturity mismatch on stock returns using a sample of Chinese listed firms during 1998–2021. Our results suggest that, on average, asset-liability maturity mismatch has a negative impact on the buy-and-hold abnormal returns of a stock, which persists after a series of endogeneity and robustness tests. Potential mechanisms tests show that investors' concerns about liquidity risk firm may face is the main reason for the results, particularly during a period of tight monetary policy, when a firm experiences a low internal cash-flow and when investors pay more attention to the liquidity risk. Further analysis shows the negative effect of maturity mismatch on stock returns is greater for non-SOEs than SOEs. We also find that the maturity mismatch strategy has a material impact on firms, which is manifested as the increase of financing risk and the decrease of operational performance. Overall, our findings are helpful to understand the negative effects of maturity mismatch in emerging markets and its asset pricing implications.

Suggested Citation

  • Qiu, Muqing & Bai, Yunxia & Chen, Taoqin, 2024. "The impact of asset-liability maturity mismatch on stock returns: Evidence from China during 1998–2021," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:pacfin:v:85:y:2024:i:c:s0927538x24001100
    DOI: 10.1016/j.pacfin.2024.102359
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    More about this item

    Keywords

    Maturity mismatches; Stock returns; Buy and hold abnormal return;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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