Increase Fund Source and Reduce Expenditures: Supplier Stability and Firms' Short‐Term Debt for Long‐Term Investment

The maturity mismatch arising from short‐term debt for long‐term investment is an important source of financial risk. In this paper, we examine whether supplier stability influences a firm's reliance on short‐term debt for long‐term investment. We find that stable supplier relationships significantly mitigate such maturity mismatches. The effect is stronger in non‐state‐owned enterprises, firms with higher financing constraints, and firms operating in poorer information environments. Mechanism tests suggest that there are two channels through which supplier stability operates: it broadens firms' funding sources and reduces expenditures. Additionally, we find that the supplier stability‐driven improvements in financing structure reduce firms' financial risks and increase market value. Overall, our findings highlight the role of supplier stability in optimizing firms' financing policies and extend the maturity matching literature by incorporating a supply chain perspective.