Do bankruptcy judicial reforms improve small and medium enterprises' investment efficiency? Evidence from China
利用中国设立专门破产法庭作为准自然实验，研究发现破产司法改革通过缓解投资不足、促进长期融资，显著提升了中小企业的投资效率，对财务脆弱和重组潜力高的企业效果更明显。
This study examines whether bankruptcy judicial reforms enhance the investment efficiency of small and medium-sized enterprises (SMEs), using the establishment of specialized bankruptcy courts in China as a quasi-natural experiment. Drawing on data from firms listed on the SME and ChiNext boards between 2015 and 2023, we find that local bankruptcy courts significantly improve SMEs' investment efficiency. The improvement is primarily driven by alleviating underinvestment rather than curbing overinvestment, and the effect is more pronounced when courts exhibit higher specialization and judicial independence. Mechanism analyses indicate that the reforms facilitate access to long-term financing, which in turn encourages firms to reduce cash holdings and increase investment in long-term projects. Moreover, bankruptcy courts serve a dual institutional function—enhancing creditor protection and supporting debtor firms—with the effects concentrated in financially vulnerable SMEs, SMEs with high restructuring potential, and in regions with elevated banking risks. Overall, the findings suggest that strengthening legal institutions through bankruptcy reform can foster SME development in emerging markets.