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Bankruptcy court establishment and corporate risk-taking

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  • Zhang, Yue
  • Wu, Kai

Abstract

This study examines the influence of bankruptcy courts on the risk-taking behavior of listed firms in China between 2002 and 2019. The establishment of bankruptcy courts discourages listed firms from taking excessive risk. This effect is more pronounced in firms with financing constraints, high market valuations, and those operating in regions with a weaker rule of law. Overall, our findings indicate that establishing bankruptcy courts benefits creditors’ rights and restrains corporate risk-taking.

Suggested Citation

  • Zhang, Yue & Wu, Kai, 2023. "Bankruptcy court establishment and corporate risk-taking," Finance Research Letters, Elsevier, vol. 58(PC).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pc:s1544612323008620
    DOI: 10.1016/j.frl.2023.104490
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    1. Gao, Peng & He, Ling & Hu, Shiyang & Xin, Qingquan, 2024. "Double-edged sword: Does strong creditor protection in the bankruptcy process affect firm productivity," International Review of Financial Analysis, Elsevier, vol. 95(PA).

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    More about this item

    Keywords

    Bankruptcy court; Judicial practice; Risk-taking;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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