IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v67y2024ipas1544612324008080.html
   My bibliography  Save this article

The impact of judicial prejudice in bankruptcy on creditors and local financial development

Author

Listed:
  • Dai, Xue Dong
  • Niu, Lisi

Abstract

In this research, we explore the implication of judicial prejudice in bankruptcy for creditor interests and local financial market development. Based on prefecture-level data, we find compelling evidence that judicial prejudice leads to capital market frictions. Regions with stronger judicial prejudice have higher borrowing costs. Moreover, judicial prejudice is negatively related to local financial market development. In sum, our research sheds light on the impact of judicial prejudice on financial market development.

Suggested Citation

  • Dai, Xue Dong & Niu, Lisi, 2024. "The impact of judicial prejudice in bankruptcy on creditors and local financial development," Finance Research Letters, Elsevier, vol. 67(PA).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324008080
    DOI: 10.1016/j.frl.2024.105778
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612324008080
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2024.105778?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jabeur, Sami Ben & Gharib, Cheima & Mefteh-Wali, Salma & Arfi, Wissal Ben, 2021. "CatBoost model and artificial intelligence techniques for corporate failure prediction," Technological Forecasting and Social Change, Elsevier, vol. 166(C).
    2. Ahmad, Muhammad Munir & Hunjra, Ahmed Imran & Taskin, Dilvin, 2023. "Do asymmetric information and leverage affect investment decisions?," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 337-345.
    3. Fard, Amirhossein & Javadi, Siamak & Kim, Incheol, 2020. "Environmental regulation and the cost of bank loans: International evidence," Journal of Financial Stability, Elsevier, vol. 51(C).
    4. Robert Kieschnick & Mark Laplante & Rabih Moussawi, 2013. "Working Capital Management and Shareholders' Wealth," Review of Finance, European Finance Association, vol. 17(5), pages 1827-1852.
    5. Yang, Z. R. & Platt, Marjorie B. & Platt, Harlan D., 1999. "Probabilistic Neural Networks in Bankruptcy Prediction," Journal of Business Research, Elsevier, vol. 44(2), pages 67-74, February.
    6. Nguyen, Hoa & Faff, Robert, 2006. "Foreign debt and financial hedging: Evidence from Australia," International Review of Economics & Finance, Elsevier, vol. 15(2), pages 184-201.
    7. Hernandez Tinoco, Mario & Wilson, Nick, 2013. "Financial distress and bankruptcy prediction among listed companies using accounting, market and macroeconomic variables," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 394-419.
    8. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    9. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(3), pages 393-414.
    10. Reboredo, Juan C. & Rivera-Castro, Miguel A., 2014. "Gold and exchange rates: Downside risk and hedging at different investment horizons," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 267-279.
    11. Charles J P Chen & C S Agnes Cheng & Jia He & Jawon kim, 1997. "An Investigation of the Relationship between International Activities and Capital Structure," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 28(3), pages 563-577, September.
    12. Jalal, Rubia & Gopinathan, R., 2022. "Time-varying and asymmetric impact of exchange rate on oil prices in India: Evidence from a multiple threshold nonlinear ARDL model," Finance Research Letters, Elsevier, vol. 50(C).
    13. Contreras, Salvador & Ghosh, Amit & Kong, Joon Ho, 2021. "Financial crisis, Bank failures and corporate innovation," Journal of Banking & Finance, Elsevier, vol. 129(C).
    14. Wang, Yizhong & Wei, Yueling & Song, Frank M., 2017. "Uncertainty and corporate R&D investment: Evidence from Chinese listed firms," International Review of Economics & Finance, Elsevier, vol. 47(C), pages 176-200.
    15. Broadstock, David C. & Chan, Kalok & Cheng, Louis T.W. & Wang, Xiaowei, 2021. "The role of ESG performance during times of financial crisis: Evidence from COVID-19 in China," Finance Research Letters, Elsevier, vol. 38(C).
    16. Pramborg, Bengt, 2005. "Foreign exchange risk management by Swedish and Korean nonfinancial firms: A comparative survey," Pacific-Basin Finance Journal, Elsevier, vol. 13(3), pages 343-366, June.
    17. Bowlin, William F., 2004. "Financial analysis of civil reserve air fleet participants using data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 154(3), pages 691-709, May.
    18. Kim, Chang-Soo & Mauer, David C. & Sherman, Ann E., 1998. "The Determinants of Corporate Liquidity: Theory and Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(3), pages 335-359, September.
    19. Abdullah Bugshan & Walid Bakry & Yongqing Li, 2021. "Oil price volatility and firm profitability: an empirical analysis of Shariah-compliant and non-Shariah-compliant firms," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 18(5), pages 1147-1167, June.
    20. Allayannis, George & Ofek, Eli, 2001. "Exchange rate exposure, hedging, and the use of foreign currency derivatives," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 273-296, April.
    21. Hutson, Elaine & Laing, Elaine, 2014. "Foreign exchange exposure and multinationality," Journal of Banking & Finance, Elsevier, vol. 43(C), pages 97-113.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kim, Soon Sung & Chung, Jaiho & Hwang, Joon Ho & Pyun, Ju Hyun, 2020. "The effectiveness of foreign debt in hedging exchange rate exposure: Multinational enterprises vs. exporting firms," Pacific-Basin Finance Journal, Elsevier, vol. 64(C).
    2. Modina, Michele & Pietrovito, Filomena & Gallucci, Carmen & Formisano, Vincenzo, 2023. "Predicting SMEs’ default risk: Evidence from bank-firm relationship data," The Quarterly Review of Economics and Finance, Elsevier, vol. 89(C), pages 254-268.
    3. Pedro J. García‐Teruel & Pedro Martínez‐Solano, 2008. "On the Determinants of SME Cash Holdings: Evidence from Spain," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(1‐2), pages 127-149, January.
    4. Goenner, Cullen F. & Lee, Kwan Yong, 2022. "The capital structure of domestic and foreign denominated debt: Firm-level evidence from South Korea," International Review of Financial Analysis, Elsevier, vol. 83(C).
    5. Monica Neamtiu & Nemit Shroff & Hal D. White & Christopher D. Williams, 2014. "The Impact of Ambiguity on Managerial Investment and Cash Holdings," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 41(7-8), pages 1071-1099, September.
    6. Choi, Young Mok & Park, Kunsu, 2019. "Does foreign currency-denominated debt affect dividend payout policy? Evidence from Korea," Journal of Multinational Financial Management, Elsevier, vol. 49(C), pages 20-34.
    7. Sami Ben Jabeur & Youssef Fahmi, 2018. "Forecasting financial distress for French firms: a comparative study," Empirical Economics, Springer, vol. 54(3), pages 1173-1186, May.
    8. Salwa Kessioui & Michalis Doumpos & Constantin Zopounidis, 2023. "A Bibliometric Overview of the State-of-the-Art in Bankruptcy Prediction Methods and Applications," World Scientific Book Chapters, in: Emilios Galariotis & Alexandros Garefalakis & Christos Lemonakis & Marios Menexiadis & Constantin Zo (ed.), Governance and Financial Performance Current Trends and Perspectives, chapter 6, pages 123-153, World Scientific Publishing Co. Pte. Ltd..
    9. Pedro J. García‐Teruel & Pedro Martínez‐Solano & Juan Pedro Sánchez‐Ballesta, 2009. "Accruals quality and corporate cash holdings," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(1), pages 95-115, March.
    10. May, Anthony D., 2014. "Corporate liquidity and the contingent nature of bank credit lines: Evidence on the costs and consequences of bank default," Journal of Corporate Finance, Elsevier, vol. 29(C), pages 410-429.
    11. Fang, Yiwei & Kang, Sang Baum & Lu, You, 2023. "Promoting financial stability of oil producers: Operational vs. financial hedging," Journal of Financial Stability, Elsevier, vol. 67(C).
    12. Bruinshoofd Allard & Kool Clemens, 2002. "The Determinants of Corporate Liquidity in the Netherlands," Research Memorandum 014, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    13. Fabio Panetta & Fabiano Schivardi & Matthew Shum, 2009. "Do Mergers Improve Information? Evidence from the Loan Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(4), pages 673-709, June.
    14. Martin Brown & Steven Ongena & Pinar Yeşin, 2014. "Information Asymmetry and Foreign Currency Borrowing by Small Firms," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 56(1), pages 110-131, March.
    15. Eling, Martin & Jia, Ruo, 2018. "Business failure, efficiency, and volatility: Evidence from the European insurance industry," International Review of Financial Analysis, Elsevier, vol. 59(C), pages 58-76.
    16. Campa, Domenico & Camacho-Miñano, María-del-Mar, 2015. "The impact of SME’s pre-bankruptcy financial distress on earnings management tools," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 222-234.
    17. Ahsan Habib & Mabel D' Costa & Hedy Jiaying Huang & Md. Borhan Uddin Bhuiyan & Li Sun, 2020. "Determinants and consequences of financial distress: review of the empirical literature," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(S1), pages 1023-1075, April.
    18. Ben-Nasr, Hamdi & Bouslimi, Lobna & Ebrahim, M. Shahid & Zhong, Rui, 2020. "Political uncertainty and the choice of debt sources," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 64(C).
    19. Duong, Huu Nhan & Khalifa, Mariem & Sheikhbahaei, Ali & Sualihu, Mohammed Aminu, 2024. "Corporate noncompliance: Do corporate violations affect bank loan contracting?," Journal of Banking & Finance, Elsevier, vol. 166(C).
    20. M. Naresh Kumar & V. Sree Hari Rao, 2015. "A New Methodology for Estimating Internal Credit Risk and Bankruptcy Prediction under Basel II Regime," Computational Economics, Springer;Society for Computational Economics, vol. 46(1), pages 83-102, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324008080. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.