Judicial Independence and Corporate Total Factor Productivity: Evidence from provincial court centralization

Based on the research sample of China’s A-share listed companies from 2011 to 2020, the study takes the reform of the centralized management of personnel, funds and property of courts at provincial level as a quasi-natural experiment, and utilizes a difference-in-differences approach to empirically explore the impact of judicial independence on total factor productivity (TFP). The empirical findings reveal that judicial independence significantly enhances corporate TFP through eliminating local protectionism, improving capital market efficiency and boosting corporate innovation. Further analyses suggest that the influence of judicial independence on corporate TFP is more pronounced in regions with less sound legal environments and among firms with higher degrees of internationalization. Additionally, the study shows that judicial independence not only boosts corporate TFP but also facilitates the reallocation of production factors toward high-productivity enterprises, thereby enhancing the resource allocation role of the capital market and improving overall TFP. These results contribute to the existing literature on determinants of TFP and the economic implications of Judicial Independence, offering empirical support for judicial reforms and the promotion of high-quality economic growth.