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Business environment optimization, financing costs, and corporate litigation risk

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  • Yang, Shuqin
  • Li, Qing

Abstract

Based on data from Chinese non-financial listed companies from 2012 to 2023, this paper constructs a business environment index encompassing seven dimensions, including the rule of law environment and government services. It employs a two-way fixed-effects model and the instrumental variable method to empirically examine the impact of business environment optimization on corporate litigation risk and its transmission mechanisms. The study finds that business environment optimization can significantly reduce corporate litigation risk, an effect achieved by lowering financing costs. Meanwhile, the proportion of institutional investor holdings exerts a significant moderating effect on the relationship between the business environment and litigation risk.

Suggested Citation

  • Yang, Shuqin & Li, Qing, 2025. "Business environment optimization, financing costs, and corporate litigation risk," Finance Research Letters, Elsevier, vol. 86(PD).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pd:s1544612325019646
    DOI: 10.1016/j.frl.2025.108710
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    References listed on IDEAS

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