Strong financial regulation and corporate bankruptcy risk in China

Yi Qin, Duc Khuong Nguyen, Javier Cifuentes-Faura and Kaiyang Zhong

Finance Research Letters, 2023, vol. 58, issue PB

Abstract: This paper employs a difference-in-differences (DID) design to examine how strong financial regulation affects the bankruptcy risk of firms in China. Our research suggests that strong financial regulation significantly decreases corporate bankruptcy risk. The baseline conclusion withstands various robustness tests, ensuring its validity. Further analysis indicates that the reduction in corporate financialization and improvement in corporate liquidity serve as underlying mechanisms. This study promotes the theoretical and empirical understanding of the link between strong financial regulation and corporate risk.

Keywords: Strong financial regulation; Difference-in-differences; Bankruptcy risk (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pb:s1544612323007158

DOI: 10.1016/j.frl.2023.104343

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