Can Circuit Courts Influence Corporate Employment? Evidence from China

Jianhui Jian, An Yan, Lin Wang, Yuehan Liu and Dan Hu

Emerging Markets Finance and Trade, 2025, vol. 61, issue 12, 3674-3690

Abstract: Judicial reforms and the expanded coverage of circuit courts have accelerated corporate compliance and standardization, offering a new catalyst for employment growth and stability. Based on the panel data from 2010 to 2022 of listed companies in China, we employ Propensity Score Matching and Difference in Differences (PSM-DID) method to empirically examine the impact of circuit courts on labor employment and its underlying mechanisms from a micro corporate perspective. We find that the establishment of circuit courts significantly increase corporate labor employment. This effect is primarily transmitted through the expansion of corporate investment scale and the reduction of transaction costs. Furthermore, the employment effects of circuit courts are more pronounced in non-state-owned firm, companies in regions with lower degrees of legal development, and regulated industries. Our research provides crucial theoretical support for judicial reform in China and offers valuable policy recommendations for stimulating employment and enhancing corporate economic performance.

Date: 2025
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DOI: 10.1080/1540496X.2025.2487571

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