Judicial Waves, Ethical Shifts: Bankruptcy Courts and Corporate ESG Performance

Zixun Zhou (), Xinyu Zhou (), Xuezhi Zhang () and Wei Chen ()
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Zixun Zhou: Macau University of Science and Technology
Xinyu Zhou: Peking University
Xuezhi Zhang: Sun Yat-Sen University
Wei Chen: Sun Yat-Sen University

Journal of Business Ethics, 2025, vol. 198, issue 3, No 3, 537-557

Abstract: Abstract Leveraging the staggered introduction of specialized bankruptcy courts across China as an exogenous shock, this study examines the impact of specialized bankruptcy courts on corporate ESG performance. Using listed firms in China from 2015 to 2021, we find that the introduction of specialized bankruptcy courts leads to an increase in corporate ESG performance. Our main results remain robust after considering endogeneity concerns and TWFE bias. The underlying mechanism is that these courts strengthen creditor protection, thereby enhancing access to bank loans for local firms. Moreover, this effect is more pronounced in firms with limited access to bank financing and in cities with more efficient legal and financial environments. Collectively, our study contributes a novel perspective to the discourse in law and finance, underscoring the broader implications of judicial reforms on corporate ethical behavior.

Keywords: ESG; Bankruptcy courts; Legal environment; Bank loans (search for similar items in EconPapers)
JEL-codes: G32 M14 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10551-024-05780-2

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