Financial-judicial specialization and stock price crash risk: Evidence from China

Kedi Wang and Chen Wu

Journal of International Financial Markets, Institutions and Money, 2024, vol. 91, issue C

Abstract: Our paper examines the impact of the improved financial-judicial specialization on Chinese capital market considering the establishment of China’s first financial court, that is, the Shanghai Financial Court, as an exogenous shock. Using a difference-in-differences (DID) estimation, we find that greater financial-judicial specialization is associated with lower risk of stock price crash. Our results also show that this effect is more pronounced for firms with poor internal control, opaque information environment, and weak internal supervision. The mechanism analysis also shows that the improvement of financial-judicial specialization will also lead to act less opportunistically and disclose more bad news. Overall, the results shed light on the important role of financial-judicial specialization in the Chinese capital market.

Keywords: Financial-judicial specialization; Stock price crash risk; Shanghai Financial Court (search for similar items in EconPapers)
JEL-codes: G12 G14 G34 K42 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:91:y:2024:i:c:s1042443124000076

DOI: 10.1016/j.intfin.2024.101941

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