IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v86y2025ipfs1544612325021312.html

Debt governance effects of bankruptcy courts: A judicial pathway to reducing corporate financing costs while analyzing heterogeneity

Author

Listed:
  • Ding, Zhaozeng
  • Cheng, Shihong

Abstract

This study examines the debt governance effects of bankruptcy courts (BCs) using data from A-share listed companies from 2003 to 2023, addressing the need to understand how BCs can reduce corporate financing costs. The findings show that the establishment of BCs significantly reduce corporate financing costs and indirectly lower financing costs by improving information transparency. Financing constraints moderate the relationship between BC establishment and financing costs, and the reduction in financing costs is more pronounced for small firms and those in eastern regions than for larger enterprises or those in central and western regions.

Suggested Citation

  • Ding, Zhaozeng & Cheng, Shihong, 2025. "Debt governance effects of bankruptcy courts: A judicial pathway to reducing corporate financing costs while analyzing heterogeneity," Finance Research Letters, Elsevier, vol. 86(PF).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pf:s1544612325021312
    DOI: 10.1016/j.frl.2025.108878
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612325021312
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2025.108878?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

    for a different version of it.

    References listed on IDEAS

    as
    1. Liu, Xiaotian & Qi, Yaxuan & Wan, Wai Yee, 2024. "Bankruptcy reforms and corporate debt structure," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 95(C).
    2. Amol Baxi, 2023. "Interim Finance in Creditor-Oriented Bankruptcy Codes: A Study in the Context of Insolvency & Bankruptcy Code, India," Vikalpa: The Journal for Decision Makers, , vol. 48(3), pages 189-205, September.
    3. Kasper Regenburg & Morten Nicklas Bigler Seitz, 2021. "Criminals, bankruptcy, and cost of debt," Review of Accounting Studies, Springer, vol. 26(3), pages 1004-1045, September.
    4. Agarwal, Shivangi & Singhvi, Bhavya, 2023. "Creditor-controlled insolvency and firm financing– Evidence from India," Finance Research Letters, Elsevier, vol. 54(C).
    5. Jie Sun & Fangyuan Yin & Edward Altman & Lewis Makosa, 2023. "Effects of corporate financial distress on peer firms: do intra-industry non-distressed firms become more conditionally conservative?," Accounting and Business Research, Taylor & Francis Journals, vol. 53(6), pages 646-670, September.
    6. Chen, Yixin & Liu, Tingting, 2024. "Bankruptcy judicial reform and corporate trade credit financing," China Economic Review, Elsevier, vol. 85(C).
    7. Edith Hotchkiss & Kose John & Bo Li & Jacopo Ponticelli & Wei Wang, 2023. "Default and Bankruptcy Resolution in China," Annual Review of Financial Economics, Annual Reviews, vol. 15(1), pages 369-385, November.
    8. Gao, Huasheng & Li, Kai & Ma, Yujing, 2021. "Stakeholder Orientation and the Cost of Debt: Evidence from State-Level Adoption of Constituency Statutes," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 56(6), pages 1908-1944, September.
    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. Si, Haiping & Li, Chengyu & Miao, Miao & Li, Xueyao & Wang, Chao, 2025. "Every coin has two sides: Does bankruptcy judicial reform promote corporate innovation༟," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 1699-1720.
    2. Zhao, Hong & Shen, Hao & Wang, Haizhi & Zhu, Yun, 2024. "State corporate tax changes and bond pricing: U.S. evidence," International Review of Financial Analysis, Elsevier, vol. 92(C).
    3. Zeng, Xuanye & Bai, Yunli & Wu, Jiaojiao & Qiu, Yutong & Zhang, Linxiu, 2026. "The impact of Vocational Skills Training of Public Employment Services on off-farm employment: Evidence from rural China," Journal of Asian Economics, Elsevier, vol. 102(C).
    4. Malm, James & Soyeh, Kenneth W. & Kanuri, Srinidhi, 2023. "Litigation risk and corporate performance," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    5. Chen, Jianqiang & Hsieh, Pei-Fang & Hsu, Po-Hsuan & Levine, Ross, 2025. "Environmental liabilities, borrowing costs, and pollution prevention activities: The nationwide impact of the Apex Oil ruling," Journal of Corporate Finance, Elsevier, vol. 91(C).
    6. Maurizio La Rocca & Tiziana La Rocca & Francesco Fasano & Javier Sanchez-Vidal, 2023. "From the Top Down: Does Corruption Affect Performance?," Papers 2310.20028, arXiv.org.
    7. de La Bruslerie, Hubert, 2025. "News flow as a determinant of the voting premium of dual-class shares," International Review of Law and Economics, Elsevier, vol. 82(C).
    8. Marius Banke & Stephanie Lenger & Christiane Pott, 2022. "ESG Ratings in the Corporate Reporting of DAX40 Companies in Germany: Effects on Market Participants," Sustainability, MDPI, vol. 14(15), pages 1-21, August.
    9. Cumming, Douglas & Lu, Fanyu & Xu, Limin & Yu, Chia-Feng (Jeffrey), 2025. "Does stakeholder orientation mitigate shareholder-employee conflicts? Evidence from a quasi-natural experiment," Journal of Corporate Finance, Elsevier, vol. 91(C).
    10. Guernsey, Scott & Sepe, Simone M. & Serfling, Matthew, 2022. "Blood in the water: The value of antitakeover provisions during market shocks," Journal of Financial Economics, Elsevier, vol. 143(3), pages 1070-1096.
    11. Garman, Amy D. & Kubick, Thomas R., 2025. "Mitigating risk-shifting in corporate pension plans: Evidence from stakeholder constituency statutes," Journal of Accounting and Economics, Elsevier, vol. 79(1).
    12. Zhiwu Chen & Yan Chen & Yan Han & Meiting Lu & Yaowen Shan, 2026. "Justice’s financial footprint: Judicial independence and the cost of debt," Australian Journal of Management, Australian School of Business, vol. 51(1), pages 174-210, February.
    13. Tanin, Tauhidul Islam & Sarker, Ashutosh & Hammoudeh, Shawkat & Batten, Jonathan A., 2024. "The determinants of corporate cost of debt during a financial crisis," The British Accounting Review, Elsevier, vol. 56(6).
    14. Camilla Ciappei & Simone Terzani & Andrea Bafundi & Giovanni Liberatore, 2023. "Do women empower other women? Empirical evidence of the effect of female pervasiveness on firm risk‐taking," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(4), pages 4157-4174, December.
    15. Al-Hadi, Ahmed & Habib, Ahsan, 2023. "Consequences of state-level regulations in accounting, finance, and corporate governance: A review," Advances in accounting, Elsevier, vol. 60(C).
    16. Peng, Michael & Stern, Elisheva R. & Hu, Hanwen, 2025. "Forecasting China bond default with severe class-imbalanced data: A simple learning model with causal inference," Economic Modelling, Elsevier, vol. 144(C).
    17. Huang, Wanran, 2025. "Establishment of bankruptcy tribunals, financing constraints and corporate investment efficiency," Finance Research Letters, Elsevier, vol. 86(PE).
    18. Huang, Kuo-Jui & Bui, Dien Giau & Hsu, Yuan-Teng & Lin, Chih-Yung, 2024. "The ESG washing in banks: Evidence from the syndicated loan market," Journal of International Money and Finance, Elsevier, vol. 142(C).
    19. Huei-Fu Lu, 2024. "Can Fulfilling Sports Corporate Social Responsibility Serve as an Immunity During the COVID-19 Pandemic? A Perspective From Social Capital and Corporate Financial Performance," SAGE Open, , vol. 14(4), pages 21582440241, November.
    20. Trinh, Vu Quang & Trinh, Hai Hong & Li, Teng & Vo, Xuan Vinh, 2024. "Climate change exposure, financial development, and the cost of debt: Evidence from EU countries," Journal of Financial Stability, Elsevier, vol. 74(C).

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    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:86:y:2025:i:pf:s1544612325021312. 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.