Performance feedback and corporate maturity mismatch: Evidence from China

Abstract

Based on the behavioral theory of the firm, we argue that different kinds of performance feedback change firms' financing demands and sources, thus affecting the corporate maturity mismatch between investment and financing. Using data on Chinese A-share listed firms, our findings suggest that positive performance feedback reduces maturity mismatch, and conversely, negative performance feedback exacerbates maturity mismatch. Further, research shows that financing constraints are the primary avenue through which performance feedback affects maturity mismatches. We also explore the heterogeneity of this influence relationship across the different characteristics of firms’ property rights, factor intensity, and performance feedback persistence. Our study helps explain the formation of a corporate maturity mismatch from the perspective of a firm's behavior. These findings have significant implications for achieving stable capital market operations and high-quality corporate development in China and other emerging economies.