Government Control, Debt Maturity Structure and Financial Distress

摘要

By sampling A-share and non-financial listed firms for the period from year 2004 to 2006 in China, we analyze the relations between debt maturity structure and financial distress to observe whether or not the governance effect of debt financing is effective. The empirical results show that: the more long-term debt as a proportion of total debt, the higher possibility the firms fall into financial distress, and this correlations between them is more obvious when the ultimate controlling shareholder is state owned company and in the area where the government intervention is stronger; in contrast, the more the short term debt debt as a proportion of total debt is, the lower possibility the firm falls into financial distress, however, this correlations is much weaker when the ultimate controlling shareholder is private owned company compared with state owned company. The results indicate that the governance mechanism of short-term debt is more effective than that of long-term debt in China because that government mainly give their influence on the longterm debt, however, the governance effect of short term debt in privated owned companies is much weaker than state owned company because that ultimate controlling shareholder of the private owned company is more likely to tunnel the listed company by means of short term debt since they have no competitive power in competition with state owned companies for long-term loans. Besides, we also find that the possibility to fall into financial distress in state owned companies is significantly lower than private owned companies, which is mainly because of the "helping hand" of government.