Geographic Proximity Variation and Corporate Debt Maturity Structure: Evidence from the Chinese High-Speed Rail Construction

Abstract

Long-term financing is highly important for enterprises and macroeconomic growth. Using the Chinese high-speed rail (HSR) construction as an exogenous shock to geographic proximity, this paper conducts staggered difference-in-differences regressions to investigate the effect of geographic proximity variation on corporate debt maturity structure. We find that opening HSR is positively associated with long-term debt ratio, suggesting that improved geographic proximity facilitates firms' access to long-term debt and improves corporate debt maturity. Moreover, this beneficial effect is more pronounced for firms with higher information opacity, fewer research reports, or smaller analyst coverage, supporting the "information mechanism" that increased geographic proximity enhances firms' information environment and thereby strengthens corporate borrowing capacities. We also empirically rule out some alternative explanations ("governance mechanism," "searching cost mechanism," etc.). This paper contributes to related literature by showing that new infrastructures like HSR can favor firms' access to long-term financing.

Keywords: geographic proximity, High-speed rail, Corporate debt maturity, Distant lender, Long-term financing