Product market competition and corporate maturity mismatch: evidence from China

Abstract

ABSTRACT This paper studies the effect of product market competition on corporate maturity mismatch, aiming to show how market competition influences management decision-making in maturities of financing and investing. Using a sample of non-financial public firms in China over 2007–2021, we find that product market competition is positively associated with corporate maturity mismatch. The motivation for lowering debt costs and the deteriorated firm performance could be potential channels. The effect is more pronounced for non-state-owned firms, firms with higher risk-taking, internationalized firms, and firms in R&D-intensive industries. Firms’ competitive positions are negatively associated with maturity mismatch. Our findings highlight that competition could be an important determinant in maturity mismatch. This study enriches our understanding of maturity mismatch causes and the link to the external business environment and provides implications for management and policymaking.