Work

How does creditor protection improve access to corporate credit?

Year: 2025

Type: article

Abstract: This paper examines the establishment of bankruptcy courts, a mechanism for creditor protection, and its impact on corporate credit accessibility. The establishment of specialist bankruptcy courts positively influences credit accessibility. This research utilizes data from 2016 to 2023 to demonstrate that bankruptcy courts enhance credit accessibility primarily through two strategies. Bankruptcy courts bolster entrepreneurial confidence by mitigating the uncertainty associated with business loss, while simultaneously alleviating information asymmetry through the provision of institutionalized transparency in bankruptcy processes. The advantage is more pronounced in capital-intensive firms with physical assets aligned with their legal protections. The benefits diminish in enterprises with significant ties to banks that offer an efficient informal lending system.This paper enhances theoretical comprehension of the interplay between formal institutions, company attributes, and financing results.

Source: International Review of Economics & Finance

DOI: 10.1016/j.iref.2025.104759

Authors: Tuo Ji, Dong Cai

Institutions: Dalian Maritime University, Dalian University

Language: English

Topic: Corporate Insolvency and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: gold

Estimated APC paid: $1,930