Does judicial reform affect firms’ short-term debt for long-term use? Evidence from China

Abstract

ABSTRACT Under the background of the misplacement of time and space in the trial judicial reform in China, this paper constructs a difference-in-difference model with multiple time periods to systematically investigate the influence of judicial reform on the short-term debt for long-term use of Chinese listed companies and its economic consequences. The research results show that, compared with the companies not affected by the judicial reform pilot, the short debt long ratio of the companies affected by the judicial reform pilot increased by 8.76% on average, and this phenomenon is more obvious in non-state-owned enterprises, asset-light enterprises, small enterprises and enterprises with unified leadership. In addition, it is found that the judicial reform and firms’ short-term debt for long-term use increase the risk of corporate bankruptcy. The results help to clarify the mystery of debt maturity structure in China, and provide new ideas and evidence for alleviating the long-term use of corporate short bonds, improving the mismatch of investment and financing maturity and preventing systemic financial risks.