Going Bankrupt in China

56 Pages Posted: 28 Jul 2020 Last revised: 16 Aug 2020

Multiple version iconThere are 3 versions of this paper

Date Written: July 2020

Abstract

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: Court efficiency, Political influence, Specialized Courts, Zombie firms

JEL Classification: G33, K22, O16

Suggested Citation

Li, Bo and Ponticelli, Jacopo, Going Bankrupt in China (July 2020). CEPR Discussion Paper No. DP15007, Available at SSRN: https://ssrn.com/abstract=3650122

Bo Li (Contact Author)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China
+86 10-627982146 (Phone)

Jacopo Ponticelli

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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