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How does bankruptcy court establishment affect heterogeneous debt financing

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  • Wang, Leiming
  • Huang, Bingyuan
  • Zuo, Xiangbin

Abstract

This study examines the effect of bankruptcy court establishment on corporate debt financing structures using panel data from 2015 to 2023. Empirical research indicates that establishing bankruptcy courts diminishes the inclination for corporate debt financing and disproportionately constrains transaction-based debt financing compared to relationship-based borrowing. Mechanism analysis verifies that these effects function by augmenting total factor productivity (TFP) and mitigating financial constraints by diminishing creditor hold-up risks and information asymmetry. This article analyzes a significant deficiency in the economic consequences of bankruptcy court establishment, illustrating how bankruptcy frameworks alter company financing hierarchies beyond conventional regulatory theories.

Suggested Citation

  • Wang, Leiming & Huang, Bingyuan & Zuo, Xiangbin, 2025. "How does bankruptcy court establishment affect heterogeneous debt financing," Finance Research Letters, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:finlet:v:84:y:2025:i:c:s1544612325009067
    DOI: 10.1016/j.frl.2025.107647
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