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Judicial independence and growth investors' decisions

Author

Listed:
  • Zheng, Panpan
  • Li, Zhen
  • Zhuang, Ziyin
  • Lin, Boyuan

Abstract

Using Chinese A-share listed companies from 2011 to 2016, we consider the establishment of China's National Circuit Courts as a quasi-natural experiment and empirically investigate the impact of judicial independence on the decisions of growth investors using the difference-in-difference (DID) method. Our findings suggest that judicial independence significantly facilitates growth investors' investment in local firms. This effect mainly stems from the reduction of business risks and the promotion of corporate innovation. Heterogeneity analysis reveals that judicial independence has a stronger promoting effect on growth investors' investment in firms in high-tech, high-growth, and poor initial legal environment.

Suggested Citation

  • Zheng, Panpan & Li, Zhen & Zhuang, Ziyin & Lin, Boyuan, 2024. "Judicial independence and growth investors' decisions," Finance Research Letters, Elsevier, vol. 62(PB).
    • Handle: RePEc:eee:finlet:v:62:y:2024:i:pb:s1544612324002368
    DOI: 10.1016/j.frl.2024.105206
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    More about this item

    Keywords

    Judicial independence; Growth investor; Business risks; Corporate innovation;
    All these keywords.

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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