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Breaking out of the cocoon: The impact of bankruptcy judicial reform on urban entrepreneurial activity

Author

Listed:
  • Si, Haiping
  • Li, Chengyu
  • Miao, Miao

Abstract

This paper uses the establishment of specialized bankruptcy courts (SBCs) in China as a quasi-natural experiment. Using firm registration data from 2000 to 2021 and a staggered difference-in-differences (DiD) model, we examine how bankruptcy judicial reform affects urban entrepreneurial activity. We find that the reform significantly stimulates entrepreneurial activity and the results remain robust across multiple checks. This effect is stronger in regions with lower rule of law, lower marketization, and less intense bank competition, as well as in technology-intensive industries. Mechanism analysis suggests that by improving judicial specialization and efficiency, bankruptcy judicial reform fosters urban entrepreneurship through the channels of credit reallocation, resource release, and improved risk expectations. This study provides important policy insights for emerging economies seeking to enhance entrepreneurial vitality through judicial reform.

Suggested Citation

  • Si, Haiping & Li, Chengyu & Miao, Miao, 2026. "Breaking out of the cocoon: The impact of bankruptcy judicial reform on urban entrepreneurial activity," Economic Modelling, Elsevier, vol. 162(C).
    • Handle: RePEc:eee:ecmode:v:162:y:2026:i:c:s0264999326002075
    DOI: 10.1016/j.econmod.2026.107678
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    Keywords

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    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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