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Discussion Paper Details

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Title: Going Bankrupt in China

Author(s): Li Bo and Jacopo Ponticelli

Publication Date: July 2020

Keyword(s): Court efficiency, Political influence, Specialized Courts and Zombie firms

Programme Area(s): Development Economics and Financial Economics

Abstract: Using new case-level data we document a set of stylized facts on bankruptcy in China and study how the staggered introduction of specialized courts across Chinese cities affected insolvency resolution and the local economy. For identification, we compare cases handled by specialized versus traditional civil courts within the same city. Specialized courts hire better-trained judges and cut case duration by 35%. State-owned firms experience larger declines in case duration relative to privately-owned firms, consistent with higher judicial independence. Cities introducing specialized courts experience faster firm entry, larger increase in average capital productivity and reallocation of employment out of "zombie" firms-intensive sectors.

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Bibliographic Reference

Bo, L and Ponticelli, J. 2020. 'Going Bankrupt in China'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15007