Financial-judicial specialization and corporate long-term investment: Evidence from the establishment of financial courts in China

Abstract

This study uses the staggered establishment of financial courts in China as an exogenous shock to investigate the impact of judicial specialization on long-term investment. Empirical results indicate that the establishment of financial courts significantly promotes firms’ long-term investment. Mechanism analyses show that financial courts improve firms’ access to debt financing, mitigate agency problems, and enhance information transparency, thereby promoting firms’ long-term investment. Further cross-sectional analyses reveal that these positive effects are more pronounced among non-state-owned firms and those with tighter financing constraints, weaker internal controls, and lower analyst coverage. By underscoring the crucial role of financial judicial specialization in shaping firms’ investment decisions, this study provides new evidence that a sound financial judicial system can function as an institutional mechanism to promote sustainable growth and long-term value creation.