ABSTRACT
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.
Acknowledgments
We are grateful to the editors and anonymous reviewers for their helpful comments, which greatly improved the earlier draft.
Declaration Of Interest Statement
We declare no conflicts of interest.
Notes
1. Our sample period starts from 2014 because the first corporate bond (Bond 112061) defaulted in 2014, which broke a long-lasting promise of rigid payment in the bond market. Since then, bond defaults have occurred frequently, especially among private enterprises.