The impact of maturity mismatch between investment and financing on corporate financial risk: evidence from China

Abstract

Balancing financing and investment periods presents a key challenge for companies to manage capital use and financial risk. Recently, maturity mismatches have caused significant financial difficulties for enterprises. Consequently, understanding how maturity mismatch affects financial risk has become a major societal concern. Using data from Chinese listed companies in Shanghai and Shenzhen A-shares from 2008 to 2022, this study explores how maturity mismatch between investment and financing affects corporate financial risk through financial flexibility. Results indicate that maturity mismatch significantly promotes corporate financial risk, primarily attributed to reduced financial flexibility. These results hold, even after conducting several robustness checks. This relationship is more pronounced among CEOs with a financial background and stable institutional investors. This study offers guidelines for financial risk management in developing countries, suggesting that enterprises should optimize investment and financing allocations, emphasize financial flexibility, hire CEOs with financial expertise, and attract stable institutional investors.

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