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The distributive effects of online judicial auctions on corporate credit

Author

Listed:
  • Cheng, Zijun
  • Huang, Michael Beichen
  • Li, Chaoqun
  • Ye, Yongwei

Abstract

This paper investigates the distributional effects of judicial FinTech on corporate financing, leveraging China’s staggered adoption of Online Judicial Auctions (OJAs). While the reform successfully enhances creditor protection–boosting auction volumes, prices, and reducing defaults–its benefits accrue unequally. Using a difference-in-differences design with multiple firm-level datasets, we find that listed firms and large firms in the National Tax Survey dataset significantly increase their leverage, whereas small and medium enterprises (SMEs) experience negligible changes in debt, investment, or employment. This heterogeneity is systematically graded by firm size. The credit expansion for large firms is not met by an increase in aggregate bank lending, revealing a short-run inelasticity of credit supply. Consequently, the surge in demand triggers a reallocation of the existing credit pool, crowding out smaller firms, which subsequently face higher borrowing costs. Our findings demonstrate that even efficiency-enhancing judicial reforms can have redistributive consequences, underscoring the critical role of general equilibrium forces and the need for complementary policies to support SMEs.

Suggested Citation

  • Cheng, Zijun & Huang, Michael Beichen & Li, Chaoqun & Ye, Yongwei, 2026. "The distributive effects of online judicial auctions on corporate credit," China Economic Review, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:chieco:v:96:y:2026:i:c:s1043951x25003074
    DOI: 10.1016/j.chieco.2025.102649
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    References listed on IDEAS

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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