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Fair and square: The impact of judicial independence on entrepreneurship

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  • Yang, Laifeng
  • Wang, Qing Sophie
  • Lai, Shaojie

Abstract

This paper investigates the effects of judicial independence on entrepreneurship by exploiting the staggered establishment of Circuit Courts (CCs) in China. We show that local entrepreneurship activities increase by 4.19% after the introduction of CCs. Our results hold after a battery of robustness tests. Reduced financial constraints could be a plausible channel through which CCs promote entrepreneurship. The positive effect of CCs is more pronounced in highly corrupted areas. Overall, this study shows that the judicial independence reform aimed at reducing local protectionism fosters entrepreneurship in a typical emerging market.

Suggested Citation

  • Yang, Laifeng & Wang, Qing Sophie & Lai, Shaojie, 2023. "Fair and square: The impact of judicial independence on entrepreneurship," Finance Research Letters, Elsevier, vol. 55(PB).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003264
    DOI: 10.1016/j.frl.2023.103954
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    References listed on IDEAS

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    2. Lv, Dayong & Ye, Qi & Jiang, Yan & Wei, Xiaokun, 2025. "Enhanced judicial independence and bond credit spreads: Evidence from the establishment of circuit courts," Research in International Business and Finance, Elsevier, vol. 79(C).
    3. Zheng, Panpan & Li, Zhen & Zhuang, Ziyin, 2023. "The impact of judicial protection of intellectual property on digital innovation: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PA).
    4. Zhiwu Chen & Yan Chen & Yan Han & Meiting Lu & Yaowen Shan, 2026. "Justice’s financial footprint: Judicial independence and the cost of debt," Australian Journal of Management, Australian School of Business, vol. 51(1), pages 174-210, February.
    5. Fang, Hongxing & Chen, Linghong & Xiong, Jiacai & Zhu, Yushu, 2024. "Social Trust and Entrepreneurship: Insights from China's Social Credit System," Finance Research Letters, Elsevier, vol. 62(PA).
    6. Tu, Hao & Yang, Shenggang & Dong, Minyi & Dai, Pengyi, 2025. "Judicial Independence and Corporate Total Factor Productivity: Evidence from provincial court centralization," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 1946-1961.
    7. Chen, Danni & Gong, Le & He, Zhonghui, 2026. "Fit for ventures: how exercise participation fuels entrepreneurial entry–a dual lens of social and psychological capital," Finance Research Letters, Elsevier, vol. 88(C).
    8. Zheng, Panpan & Li, Zhen & Zhuang, Ziyin & Lin, Boyuan, 2024. "Judicial independence and growth investors' decisions," Finance Research Letters, Elsevier, vol. 62(PB).
    9. Chi, Cheng & Ren, Baozeng & Guo, Xiaoli, 2024. "Judicial independence and entrepreneurship – A quasi-natural experiment based on the judicial delocalization reform," Finance Research Letters, Elsevier, vol. 70(C).
    10. Wang, Qing Sophie & Chen, Lihan & Lai, Shaojie & Anderson, Hamish D., 2024. "Judicial reform and corporate cash holdings: Evidence from the establishment of circuit courts in China," Journal of Behavioral and Experimental Finance, Elsevier, vol. 43(C).
    11. Jie Zhu & Zhichao Wang & Zhi Xu & Ye Xu & ChangQi Tao, 2025. "Impact of digital technology innovation on entrepreneurial activity," International Entrepreneurship and Management Journal, Springer, vol. 21(1), pages 1-21, December.
    12. Zhang, Yufei & Ye, Guanhong, 2025. "Judicial independence and corporate ESG performance," Economic Analysis and Policy, Elsevier, vol. 88(C), pages 1789-1818.
    13. Liu, Yurou, 2023. "Judicial independence and crash risk: Evidence from a natural experiment in China," Journal of Corporate Finance, Elsevier, vol. 83(C).

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