Judicial protection of creditors and investors and corporate investment efficiency: a perspective of judicial professionalism

A sound financial legal environment is crucial to the prosperity of the real economy. Exploiting the quasi-natural experiment of establishing financial courts in selected regions of China, this paper examines how judicial protection for creditors and investors affects corporate investment efficiency from the perspective of judicial professionalism. We find that the establishment of financial courts significantly improves the investment efficiency of firms in pilot regions, both curbing overinvestment and alleviating underinvestment. Mechanism tests show that financial courts improve the efficiency and fairness of judicial trials, strengthen contracting institutions, and mitigate agency problems. The effect is more pronounced among firms with lower internal control quality and greater separation between control rights and cash flow rights. These findings provide evidence that the financial legal system promotes the high-quality development of China’s economy and offer useful guidance on strengthening judicial institutions to serve the real economy.

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Publication Details

Journal
China Journal of Accounting Studies
Published
2026-10-29
DOI
https://doi.org/10.1080/21697213.2026.2751798
Primary Topic
Corporate Finance and Governance
Type
article
Field-Weighted Citation Impact
0.00

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Judicial protection of creditors and investors and corporate investment efficiency: a perspective of judicial professionalism

Jinyang Liu, Kangtao Ye, Zhaohui Wang
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China Journal of Accounting Studies
Corporate Finance and Governance
article

Judicial protection of creditors and investors and corporate investment efficiency: a perspective of judicial professionalism

Jinyang Liu, Kangtao Ye, Zhaohui Wang
article en

Abstract

A sound financial legal environment is crucial to the prosperity of the real economy. Exploiting the quasi-natural experiment of establishing financial courts in selected regions of China, this paper examines how judicial protection for creditors and investors affects corporate investment efficiency from the perspective of judicial professionalism. We find that the establishment of financial courts significantly improves the investment efficiency of firms in pilot regions, both curbing overinvestment and alleviating underinvestment. Mechanism tests show that financial courts improve the efficiency and fairness of judicial trials, strengthen contracting institutions, and mitigate agency problems. The effect is more pronounced among firms with lower internal control quality and greater separation between control rights and cash flow rights. These findings provide evidence that the financial legal system promotes the high-quality development of China’s economy and offer useful guidance on strengthening judicial institutions to serve the real economy.

China Journal of Accounting Studies
Renmin University of China (CN), South China University of Technology (CN)
National Natural Science Foundation of China
Peace, justice, and strong institutions, Decent work and economic growth
Openalex Percentile: Top 4%
Corporate Finance and Governance
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