Journal of Applied Finance & Banking

Does monetary policy tightening reduce the maturity mismatch of investment and financing: Empirical evidence from China

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• Abstract

   

  Using the financial data of A-share listed companies in 2003-2018, this paper studies the maturity mismatch of investment and financing in China based on the sensitivity of investment to change of short-term loans. This study finds that corporate investment relies on short-term loans rather than long-term loans, so the maturity mismatch of investment and financing is widespread. In addition, we examine the mechanism of the heterogeneity between state-owned enterprises and private enterprises. We find that tightening monetary policy exacerbates the financing constraints faced by enterprises, in the meanwhile, strengthens the role of loan supervision. Because of the existence of credit discrimination, more credit resources fly to state-owned enterprises during period of monetary policy tightening and loan supervision is strengthened, so the problem of maturity mismatch of investment and financing is weakened. However, private enterprises face severe shortage in supply of short-term loans during the period of monetary policy tightening, so the role of financing constraints dominates, which makes the maturity mismatch of investment and financing intensified.

  JEL classification numbers: G31 G32 G38

  Keywords: Monetary policy, Maturity mismatch, Financial constraint, Loan supervision