Going Bankrupt in China
53 Pages Posted: 21 Sep 2018 Last revised: 1 Jul 2020
Date Written: June 30, 2020
Using new case-level data we document a set of stylized facts on bankruptcy in China and study how the staggered introduction of specialized courts across Chinese cities affected insolvency resolution and the local economy. For identification, we compare cases handled by specialized versus traditional civil courts within the same city. Specialized courts hire better-trained judges and cut case duration by 35%. State-owned firms experience larger declines in case duration relative to privately-owned firms, consistent with higher judicial independence. Cities introducing specialized courts experience faster firm entry, larger increase in average capital productivity and reallocation of employment out of "zombie" firms-intensive sectors.
Keywords: Specialized Courts; Political influence; Court efficiency; Zombie firms.
JEL Classification: G33, G34, K22, O16.
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