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Bankruptcy resolution and corporate debt maturity

Author

Listed:
  • Cheng, Zijun
  • Hu, Jiayin
  • Huang, Michael Beichen
  • Zhao, Shijie

Abstract

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.

Suggested Citation

  • Cheng, Zijun & Hu, Jiayin & Huang, Michael Beichen & Zhao, Shijie, 2026. "Bankruptcy resolution and corporate debt maturity," China Economic Review, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:chieco:v:95:y:2026:i:c:s1043951x25002949
    DOI: 10.1016/j.chieco.2025.102636
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    Keywords

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    JEL classification:

    • 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
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General

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