Financial Mismatch and Default Risk:Evidence from Chinese Nonfinancial Listed Private Enterprises

Using China's nonfinancial listed private enterprises as a sample, we discuss the impact of financial mismatch on default risk from the perspective of political connections. The findings suggest that financial mismatch significantly increases the default risk of private enterprises, and political connections can effectively alleviate the default risk caused by financial mismatch. Further mechanism tests show that financial mismatch aggravates private enterprises' financing constraints and increases their default risk. Our findings provide a reference for alleviating private enterprises' dilemma of difficult and expensive financing and preventing or resolving the major financial risk of enterprises.

Automated summary

The study finds that financial mismatch significantly increases the default risk of private enterprises, but political connections can effectively alleviate this risk. Financial mismatch worsens financing constraints and increases default risk.