Judicial Specialization Reform and Corporate Short-term Loans for Long-term Investment:Evidence from the Establishment of Bankruptcy Courts
This paper utilizes the establishment of bankruptcy courts across China since 2019 as a quasi-natural experiment to empirically investigate the impact of judicial specialization reform on corporate short-term loans for long-term investment.The findings reveal that the establishment of bankruptcy courts significantly reduces the extent to which firms engage in short-term loans for long-term investment.Specifically,it reduces corporate debt repayment risk,enabling more access to long-term loans and thereby decreasing reliance on short-term loans for long-term investment.Furthermore,this reform mitigates excessive investment by increasing the risk of control rights transfer and alleviating agency conflicts between shareholders and creditors,ultimately reducing short-term loans for long-term investment.Cross-sectional difference testing shows that the negative impact of bankruptcy court establishment on short-term loans for long-term investment is primarily observed in samples from regions with a stronger rule of law,less intense industry competition,higher corporate bankruptcy risk,and non-state-owned enterprises.Economic consequences indicate that the establishment of bankruptcy courts fosters corporate innovation by reducing short-term loans for long-term investment,specifically enhancing the quality rather than the quantity of innovation.This paper provides empirical evidence for the economic benefits brought by judicial specialization reform and offers a new perspective for understanding and reducing the occurrence of the phenomenon where firms use short-term loans for long-term investment.
judicial specialization reformshort-term loans for long-term investmentlong-term loansexcessive investmentcorporate innovation
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