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Strong financial regulation and corporate bankruptcy risk in China

Author

Listed:
  • Qin, Yi
  • Nguyen, Duc Khuong
  • Cifuentes-Faura, Javier
  • Zhong, Kaiyang

Abstract

This paper employs a difference-in-differences (DID) design to examine how strong financial regulation affects the bankruptcy risk of firms in China. Our research suggests that strong financial regulation significantly decreases corporate bankruptcy risk. The baseline conclusion withstands various robustness tests, ensuring its validity. Further analysis indicates that the reduction in corporate financialization and improvement in corporate liquidity serve as underlying mechanisms. This study promotes the theoretical and empirical understanding of the link between strong financial regulation and corporate risk.

Suggested Citation

  • Qin, Yi & Nguyen, Duc Khuong & Cifuentes-Faura, Javier & Zhong, Kaiyang, 2023. "Strong financial regulation and corporate bankruptcy risk in China," Finance Research Letters, Elsevier, vol. 58(PB).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pb:s1544612323007158
    DOI: 10.1016/j.frl.2023.104343
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    1. Fu, Tong & Li, Zijun & Qiu, Zhaoxuan & Tong, Xinle, 2024. "The policy gap between finance and economy: Evidence from China's green finance policy," Energy Economics, Elsevier, vol. 134(C).
    2. Li, Chenglin & Dong, Xuehan & Qin, Yi, 2024. "The misallocation of finance in China," Finance Research Letters, Elsevier, vol. 65(C).
    3. Ma, Anmiao, 2024. "The role of management characteristics in trade frictions and corporate financialization," Finance Research Letters, Elsevier, vol. 65(C).

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