Fair and square: The impact of judicial independence on entrepreneurship

•Judicial independence on reducing local protectionism fosters entrepreneurship.•We exploit the establishment of circuit courts (CCs) in China as an exogeneous shock.•Our results hold after a battery of robustness tests.•Reduced financial constraints could be a plausible channel.•The positive effect...

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Bibliographic Details
Published inFinance research letters Vol. 55; p. 103954
Main Authors Yang, Laifeng, Wang, Qing Sophie, Lai, Shaojie
Format Journal Article
LanguageEnglish
Published Elsevier Inc 01.07.2023
Subjects
Circuits courts
Entrepreneurship
Financial constraints
Judicial independence
Financial constraints
Entrepreneurship
Judicial independence
Circuits courts
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Summary:•Judicial independence on reducing local protectionism fosters entrepreneurship.•We exploit the establishment of circuit courts (CCs) in China as an exogeneous shock.•Our results hold after a battery of robustness tests.•Reduced financial constraints could be a plausible channel.•The positive effect of CCs is more pronounced in highly corrupted areas. This paper investigates the effects of judicial independence on entrepreneurship by exploiting the staggered establishment of Circuit Courts (CCs) in China. We show that local entrepreneurship activities increase by 4.19% after the introduction of CCs. Our results hold after a battery of robustness tests. Reduced financial constraints could be a plausible channel through which CCs promote entrepreneurship. The positive effect of CCs is more pronounced in highly corrupted areas. Overall, this study shows that the judicial independence reform aimed at reducing local protectionism fosters entrepreneurship in a typical emerging market.
ISSN:1544-6123
1544-6131
DOI:10.1016/j.frl.2023.103954