Central Judicial Inspector: Establishment of Circuit Tribunals and Corporate Innovation in China

53 Pages Posted: 30 Jan 2023

See all articles by Kai Wu

Kai Wu

Central University of Finance and Economics (CUFE) - School of Finance

Minli Sun

Central University of Finance and Economics (CUFE) - School of Finance

Yuzi Chen

Central University of Finance and Economics (CUFE) - School of Finance

Date Written: January 25, 2023

Abstract

The growing localization of the judicial system has been a critical concern in China's justice reform, and its consequence on entrepreneurship receives little attention. We evaluate the effects of judicial reform on the innovation of private-controlled listed firms in China using the transformation of judicial decentralization: inter-provincial circuit tribunals. Results show that the establishment of circuit tribunals significantly promotes innovation quantity and quality. The legal reform affects firms' incentives to innovate by increasing access to long-term bank loans and enhancing risk tolerance. The positive effect is more pronounced for firms with weaker political ties, a longer distance from the Supreme People's Court, and a better market institution for the private sector. Our findings provide policy implications of judicial checks and balances for promoting regional innovation activities in emerging countries.

Keywords: Judicial institutions, corporate innovation, intellectual property protection

JEL Classification: K40, O31, O32

Suggested Citation

Wu, Kai and Sun, Minli and Chen, Yuzi, Central Judicial Inspector: Establishment of Circuit Tribunals and Corporate Innovation in China (January 25, 2023). Available at SSRN: https://ssrn.com/abstract=4337058 or http://dx.doi.org/10.2139/ssrn.4337058

Kai Wu (Contact Author)

Central University of Finance and Economics (CUFE) - School of Finance ( email )

Beijing
China

Minli Sun

Central University of Finance and Economics (CUFE) - School of Finance ( email )

Beijing
China

Yuzi Chen

Central University of Finance and Economics (CUFE) - School of Finance ( email )

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