EconPapers    
Economics at your fingertips  
 

How does regional judicial quality improvement enhance enterprises' capital allocation efficiency: Evidence from the establishment of circuit court

Lei Liu

International Review of Financial Analysis, 2025, vol. 103, issue C

Abstract: This paper makes a valuable contribution to the existing research framework on finance and law. The subject of this investigation is the efficacy of capital resource allocation in enterprises in response to regional judicial quality enhancements. This study explicitly employs the establishment of circuit courts as a natural experiment to investigate the causal relationship between the efficacy of capital allocation and judicial enhancement in enterprises that operated from 2012 to 2022. The findings suggest that the effective implementation of circuit courts can enhance the efficiency of capital allocation for firms by reducing finance costs and increasing the productivity of all factors. Nevertheless, the findings do not apply to all enterprises. Heterogeneous analysis suggests that enterprises subject to more severe financial constraints are more susceptible to changes in the legal environment. Furthermore, the heterogeneous effects of a variety of legal environments suggest that the inherent legal environment has a substantial impact on the improvement of regional judicial quality. This paper provides a unique viewpoint on the inefficiency of enterprises' allocation of capital resources.

Keywords: Judicial improvement; Capital allocation efficiency; Circuit court (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521925002996
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:103:y:2025:i:c:s1057521925002996

DOI: 10.1016/j.irfa.2025.104212

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-05-20
Handle: RePEc:eee:finana:v:103:y:2025:i:c:s1057521925002996