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Creditor protection and asset-debt maturity mismatch: a quasi-natural experiment in China

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  • Shuaihe Jiang
  • Xiaodong Gan
  • Yutong Li
  • Kaiti Zou

Abstract

Recently, the Chinese Government has strengthened the enforcement of bankruptcy laws to protect creditors’ rights. This study shed light on the effect of creditor protection on asset-debt maturity mismatch by employing a quasi-natural experiment in China. The results show that creditor protection mitigates maturity mismatch, and the effect is more pronounced among financially constrained firms. Results remain robust after the dynamic effects test, placebo test, propensity score matching approach, entropy balancing method, and controlling for COVID-19 shocks. Mechanism tests show that creditor protection decreases the cost of debt and reduces over-investment. The effect of creditor protection is pronounced in private companies, financially independent companies, and companies with secured loans. Creditor rights can alleviate maturity mismatch in firms with medium ownership concentration and managerial ownership levels. Economic consequences studies suggest that creditor protection reduces corporate default risk. This study reveals the mechanism and effect of creditor protection on asset-debt maturity mismatch in emerging markets, providing recommendations to policymakers for assessing and improving bankruptcy law regimes.

Suggested Citation

  • Shuaihe Jiang & Xiaodong Gan & Yutong Li & Kaiti Zou, 2025. "Creditor protection and asset-debt maturity mismatch: a quasi-natural experiment in China," Applied Economics, Taylor & Francis Journals, vol. 57(52), pages 8674-8692, November.
    • Handle: RePEc:taf:applec:v:57:y:2025:i:52:p:8674-8692
    DOI: 10.1080/00036846.2024.2402093
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