Does the establishment of bankruptcy courts affect the risk of corporate collapse?

Abstract

This study aims to empirically investigate the impact of establishing bankruptcy courts on corporate bankruptcy risk using a difference-in-differences model. The findings reveal that the establishment of these courts significantly reduces corporate bankruptcy risk. Additionally, the study explores the underlying mechanism through which bankruptcy courts affect this risk, suggesting that they effectively mitigate it by promoting technological innovation and enhancing enterprises' risk tolerance. Furthermore, the study examines the varying impact of bankruptcy courts on corporate bankruptcy risk across different ownership structures and levels of market competition.