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Judicial Independence and corporate labor investment: Evidence from China

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  • Dong, Nanyan
  • Zhang, Jiang
  • Xu, Xiangbing
  • Ou, Peiyu

Abstract

Using a staggered difference-in-differences approach, we find that the establishment of circuit tribunals significantly increases corporate labor investment by improving the financing environment and promoting innovation. The effect is more pronounced in provinces with lower levels of marketization and weaker legal institutions, as well as in labor-intensive industries, state-owned enterprises, and financially constrained non-state enterprises. Additionally, circuit tribunals also enhance firm valuation, with no evidence of adverse effects on labor share or labor investment efficiency. Our study highlights the institutional role of judicial independence in supporting corporate hiring, contributing to the literature on judicial reform and labor investment in emerging markets.

Suggested Citation

  • Dong, Nanyan & Zhang, Jiang & Xu, Xiangbing & Ou, Peiyu, 2026. "Judicial Independence and corporate labor investment: Evidence from China," Emerging Markets Review, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:ememar:v:70:y:2026:i:c:s1566014125001530
    DOI: 10.1016/j.ememar.2025.101404
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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General

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