Potential risks in the easy market access: A perspective from corporate asset-debt maturity mismatch

Abstract

The Negative List System for Market Access (NLSMA), which opens all sectors except a proscribed few to market entities, is an innovative product market liberalization reform in China. This study examines the impact of the NLSMA on corporate asset-debt maturity mismatch. The baseline regression results show that the NLSMA significantly aggravates corporate asset-debt maturity mismatch, and this effect is more pronounced in firms with non-state ownership, more severe financial constraints, or higher entrance barriers. We further find that the NLSMA affects corporate asset-debt maturity mismatch from both credit demand- and supply-side factors. Furthermore, the intensified maturity mismatch after deregulation can decrease firms’ profitability and increase the likelihood that firms default. Finally, to alleviate the maturity mismatch, firms may actively obtain resources from powerful stakeholders and improve information transparency.