Bankruptcy system reform and shadow banking activities of non-financial enterprises: evidence from China

Purpose Bankruptcy system reform is an effective measure to improve judicial efficiency in bankruptcy proceedings and protect the legitimate rights and interests of creditors. It plays an important role in promoting the development of credit markets. Design/methodology/approach Based on a quasi-natural experiment of establishing bankruptcy court in China, this paper examines the impact of the establishment of bankruptcy court on shadow banking activities of non-financial enterprises, using a multi-period difference-in-differences model with China's A-share listed enterprises as the research object from 2016 to 2022. Findings The findings show that the establishment of bankruptcy court increases the scale of shadow banking activities of non-financial enterprises. Furthermore, enhancing creditor protection and increasing management risk preference play important mechanism effect. Bankruptcy law enforcement efficiency demonstrates a strong moderating effect. Originality/value This study provides empirical evidence for evaluating the quality and effectiveness of bankruptcy system reform and offers instructive insights for activating informal finance, regulating shadow banking activities and maintaining financial market stability.

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Publication Details

Journal
Asian Review of Accounting
Published
2026-11-02
DOI
https://doi.org/10.1108/ara-12-2025-0451
Primary Topic
Corporate Insolvency and Governance
Type
article
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article

Bankruptcy system reform and shadow banking activities of non-financial enterprises: evidence from China

李世辉, Mengzhe Li, Bo Yuan
5 links
Asian Review of Accounting
Corporate Insolvency and Governance
article

Bankruptcy system reform and shadow banking activities of non-financial enterprises: evidence from China

李世辉, Mengzhe Li, Bo Yuan
article en

Abstract

Purpose Bankruptcy system reform is an effective measure to improve judicial efficiency in bankruptcy proceedings and protect the legitimate rights and interests of creditors. It plays an important role in promoting the development of credit markets. Design/methodology/approach Based on a quasi-natural experiment of establishing bankruptcy court in China, this paper examines the impact of the establishment of bankruptcy court on shadow banking activities of non-financial enterprises, using a multi-period difference-in-differences model with China's A-share listed enterprises as the research object from 2016 to 2022. Findings The findings show that the establishment of bankruptcy court increases the scale of shadow banking activities of non-financial enterprises. Furthermore, enhancing creditor protection and increasing management risk preference play important mechanism effect. Bankruptcy law enforcement efficiency demonstrates a strong moderating effect. Originality/value This study provides empirical evidence for evaluating the quality and effectiveness of bankruptcy system reform and offers instructive insights for activating informal finance, regulating shadow banking activities and maintaining financial market stability.

Asian Review of Accounting
Central South University (CN)
Peace, justice, and strong institutions
Openalex Percentile: Top 9%
Corporate Insolvency and Governance
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