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Capital account liberalization and corporate maturity mismatch: The role of bank competition

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  • Si, Deng-Kui
  • Wang, Meng
  • Ding, Hui

Abstract

This paper investigates the causal effect of capital account liberalization on corporate maturity mismatch of financing and investment and further explores the role of bank competition in shaping the effect. The results show that capital account liberalization significantly reduces corporate maturity mismatch by lowering financing costs and improving the quality of internal controls of the firms. The effect is more pronounced for firms with higher financing constraints and growth opportunities, technological and manufacturing firms, and firms located in market-driven and capital-intensive regions. We also find that bank competition reinforces the channels of credit financing costs and the quality of internal control of capital account liberalization, thus enhancing its overall effect on corporate maturity mismatch. This paper offers a richer understanding of how capital account liberalization and competition in the banking sector jointly affect corporate debt structure and match decisions between investment and financing structure.

Suggested Citation

  • Si, Deng-Kui & Wang, Meng & Ding, Hui, 2023. "Capital account liberalization and corporate maturity mismatch: The role of bank competition," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:pacfin:v:82:y:2023:i:c:s0927538x23002081
    DOI: 10.1016/j.pacfin.2023.102137
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