Enhanced judicial independence and bond credit spreads: Evidence from the establishment of circuit courts

IF 6.9 2区经济学 Q1 BUSINESS, FINANCE

Research in International Business and Finance Pub Date : 2025-07-01 DOI:10.1016/j.ribaf.2025.103064

Dayong Lv , Qi Ye , Yan Jiang , Xiaokun Wei

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Abstract

Using a large sample of bonds issued by Chinese listed firms from 2010 to 2021, we explore the relationship between judicial independence as improved by Circuit Courts (CCs) and bond credit spreads (BCS). We find that bond issuers covered by CCs experience a decrease in BCS compared to those uncovered. This result remains unchanged under various checks, including a propensity score matching method, entropy balance method, difference-in-differences framework, alternative sample, and other robust tests. In addition, this favorable effect of improved judicial independence is greater for issuers with greater default risks or liquidity risks, consistent with the “perceived lower recovery risk story” and “perceived lower liquidity risk story.” Finally, this effect is stronger for bond issuers operating in regions with poor legal environments, higher levels of local protectionism, or stronger government interventions. Our paper stresses the important role of the judiciary in decreasing debt financing costs.

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加强司法独立和债券信用息差：来自设立巡回法院的证据

本文以2010年至2021年中国上市公司发行的债券为样本，探讨了巡回法院（cc）改善的司法独立与债券信用利差（BCS）之间的关系。我们发现，与未覆盖的债券发行人相比，被CCs覆盖的债券发行人的BCS减少。该结果在各种检验下保持不变，包括倾向得分匹配法、熵平衡法、差中差框架、替代样本和其他鲁棒性检验。此外，对于违约风险或流动性风险较大的发行人，司法独立改善的这种有利影响更大，这与“感知到的更低的回收风险故事”和“感知到的更低的流动性风险故事”一致。最后，在法律环境较差、地方保护主义程度较高或政府干预力度较大的地区经营的债券发行人，这种影响更大。本文强调了司法在降低债务融资成本中的重要作用。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Research in International Business and Finance BUSINESS, FINANCE-

CiteScore

11.20

自引率

9.20%

发文量

240

期刊介绍： Research in International Business and Finance (RIBAF) seeks to consolidate its position as a premier scholarly vehicle of academic finance. The Journal publishes high quality, insightful, well-written papers that explore current and new issues in international finance. Papers that foster dialogue, innovation, and intellectual risk-taking in financial studies; as well as shed light on the interaction between finance and broader societal concerns are particularly appreciated. The Journal welcomes submissions that seek to expand the boundaries of academic finance and otherwise challenge the discipline. Papers studying finance using a variety of methodologies; as well as interdisciplinary studies will be considered for publication. Papers that examine topical issues using extensive international data sets are welcome. Single-country studies can also be considered for publication provided that they develop novel methodological and theoretical approaches or fall within the Journal''s priority themes. It is especially important that single-country studies communicate to the reader why the particular chosen country is especially relevant to the issue being investigated. [...] The scope of topics that are most interesting to RIBAF readers include the following: -Financial markets and institutions -Financial practices and sustainability -The impact of national culture on finance -The impact of formal and informal institutions on finance -Privatizations, public financing, and nonprofit issues in finance -Interdisciplinary financial studies -Finance and international development -International financial crises and regulation -Financialization studies -International financial integration and architecture -Behavioral aspects in finance -Consumer finance -Methodologies and conceptualization issues related to finance