Can The Corporate Debt Maturity Structure Predict Future Stock Price Crash Risk ?

The capital market of China has developed rapidly in recent years,but there are many problems in the information disclosure system and manaers of listed firms have the chance to hide or delay the internal information,which is caused by serious information asymmetry in the securities market and the regulatory level of the regulatory system is not perfect.For corporate incentives,such as equity incentives,tax planning,and personal empowerment,the firm management tends to conceal or delay the disclosure of bad news from their enterprises,or we called "bad news",such "bad news" continue to accumulate over time and may outbreak under the influence of external factors,resulting in stock price collapse,leading to a significant reduction in wealth of investors.However,in the debt financing market,creditors have more channels to get company's information than external investors,the creditor always increase terms to restrain the self-interest behavior of managers before signing the loan contract.As Chinese listed firms issue short-term debt,making the creditor have more opportunities to monitor the behavior of managers,through careful investigation the firms internal quality and credit levels before signing of the loan contract,which can make up the problem of information asymmetry in the securities.To the first piont,listed firms are frequently supervised by the creditor every time when the short-term debt is extended or renewed,leading the firms management to have less opportunity to hide the bad information.Moreover,long-term debt has poor liquidity,long term and bear the high interest rate risk,which indicates that creditors recognize the firms' internal governance and performance prospects if the enterprises get long term debt.So creditors will stop lending or shortening the loan's term to reduce the risk once the firms' internal bad news is obtained.As a result,the variation of the company's debt maturity structure can convey the firms' internal quality information to the stock market,thus predicting the risk of future stock crashes.Based on the above,we examine whether a enterprise's debt maturity structure affects its stock price crash risk.We find that short-term debts issued by firms that have a higher proportion of their debt maturing within the following year trade at higher stock price crash risk,even after controlling for the firm's total asset liability ratio and all other known determinants of stock price crash risk.All else equal,state-owned firms that have a higher proportion of short-term in their total debt maturing within the next year are also more likely to experience deterioration in their stock price stability by contrast with non state owned enterprises.In addition to that,large scale firms that have a higher proportion of short-term in their total debt maturing and are more likely to experience deterioration in their stock price stability by contrast with small scale enterprises.This effect is present in Shanghai and Shenzhen main board listed companies.Our results are broadly consistent with theories that argue that short-maturity debt exposes the enterprise to rollover risk,which increases the enterprise's overall credit risk.Our results also highlight that we may obtain some early warning signals by analyzing of the information of financial reports and the others beyond the reports.