Bankruptcy resolution and corporate debt maturity

We construct a comprehensive bankruptcy database of Chinese firms using a novel data source of judgment files. Concomitant with a new theoretical framework that explicitly differentiates between bankruptcy resolution and other debt enforcement proceedings, we show that improved bankruptcy efficiency benefits long-term creditors by mitigating dilution risks. Empirically, the long-term debt ratio of Chinese firms increases by 16% after the establishment of bankruptcy tribunals. Mechanism tests confirm an increase in bankruptcy filings, a reduction in other debt enforcement proceedings, a higher ratio of asset preservation, and an increased supply of long-term credit from local banks. These shifts in debt maturity structure are associated with enhanced firm investment and increased labor demand. We shed new light on bankruptcy resolution as a previously underappreciated institutional channel through which legal frameworks influence creditor coordination and debt maturity structure.