The legal right protection of lenders and corporate employment: Evidence from specialized bankruptcy courts

Jiacai Xiong, Chen Peng and Zelin Yang

Finance Research Letters, 2025, vol. 76, issue C

Abstract: This paper examines the impact of enhanced creditor protection on corporate employment. We exploit the staggered establishment of specialized bankruptcy courts (SBCs) as an exogenous positive shock. Utilizing a sample of Chinese listed firms from 2011 to 2021, we find that the SBCs can significantly encourage corporate employment. The positive effect is more salient in firms with higher financial risk, and in regions with lower financial development and poorer legal environment. Additional analyses indicate that the increased trade credit availability, eased financial constraints and reduced zombie firms serve as mechanisms underlying the baseline relationship.

Keywords: Corporate employment; Creditor protection; Specialized bankruptcy courts; Trade credit; Financial constraints (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:76:y:2025:i:c:s1544612325002247

DOI: 10.1016/j.frl.2025.106960

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