Financial stability strategies: Bankruptcy courts and corporate capital structure adjustment

Abstract

This paper examines the effects of bankruptcy courts on the adjustment of corporate capital structures among A-share listed companies from 2010 to 2022, utilizing a multi-timepoint difference-in-differences model. The findings reveal that the establishment of bankruptcy courts significantly promotes the adjustment of corporate capital structures. This effect is more profound in companies operating under stronger rule-of-law environments, those with higher capital intensity, and those with lower commercial credit. Further mechanism analysis suggests that easing financing constraints and enhancing internal liquidity management are potential pathways through which bankruptcy courts facilitate these adjustments.