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Bankruptcy law reform and financing costs for small and medium enterprises

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  • Yu, Yudong
  • Wang, Shanshan

Abstract

Bankruptcy laws can profoundly affect a variety of economic activities. This paper focuses on uncovering the effect of the recent bankruptcy law reform in China on the financing cost of Small and Medium Enterprises (SMEs). Exploiting a comprehensive research sample of listed SMEs in China from 2014 to 2024, this research offers evidence that the bankruptcy law reform substantially lowers SMEs’ financing costs, especially for non-manufacturing firms. Additionally, this paper also argues that the speed of bankruptcy liquidation and the amount of capital that creditors are able to recover are core economic mechanisms underpinning the relationship.

Suggested Citation

  • Yu, Yudong & Wang, Shanshan, 2025. "Bankruptcy law reform and financing costs for small and medium enterprises," Finance Research Letters, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:finlet:v:84:y:2025:i:c:s1544612325010529
    DOI: 10.1016/j.frl.2025.107794
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    References listed on IDEAS

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