Summary:
As a widely adopted transaction method, trade credit serves as a significant external financing channel for enterprises. However, its unsecured and interest-free nature may also lead to payment defaults. Severe defaults not only disrupt regular business operations but also impede the smooth circulation of industrial and supply chains, while undermining the stability of the financial system. To address this issue, the 20th CPC Central Committee Third Plenum explicitly called for improving the legal and regulatory framework for the settlement of overdue corporate receivables. Despite increasingly comprehensive legislation in China, the challenge of insufficient judicial resource allocation has become increasingly prominent, with the most salient conflict being the imbalance between the large volume of cases and the scarcity of judicial personnel. To alleviate the tension between the high caseload and limited judicial resources within the legal system, and to enhance the efficiency and quality of civil litigation, the Supreme People's Court implemented a two-year reform of the division between complex and simple cases in 2020. Utilizing this reform as a quasi-natural experiment, this study employs a sample of A-share listed firms from 2015 to 2023 to examine the causal effects of optimized judicial resource allocation on trade credit using a difference-in-differences (DID) model. The findings reveal that, firms in pilot areas of the streamlining reform experienced a significant reduction in trade credit appropriation. This result indicates that the impact of the streamlining reform on corporate trade credit demonstrates a stronger governance effect relative to a promotion effect. Mechanism tests identify that this governance effect operates through increasing the frequency of lawsuits and the amounts involved, thereby reducing firms' speculative demand for trade credit. Further analysis shows that the reform exerts a more pronounced governance effect on large-amount, long-term trade credit, as well as on both “passive delinquency” and “active delinquency” behaviors. Tests on economic consequences demonstrate that the governance of trade credit through the reform not only mitigates the agency costs of delinquent firms but also inhibits their overinvestment. This paper makes several potential contributions. First, it examines how judicial reform affects trade credit from a governance perspective. We find that the reform of the division between complex and simple cases effectively disciplines trade credit, thereby extending and enriching the literature both theoretically and empirically. Second, by focusing on the reallocation of judicial resources, the study complements the literature on judicial reform and firm behavior. The procedural optimization analyzed here is a Pareto improvement that neither increases the number of courts nor raises costs, rendering it economically significant, and the evidence on its efficacy can inform judicial or other reforms under resource constraints. Thus, we provide direct empirical evidence on the effectiveness of the reform. Third, the paper offers a novel methodological and conceptual lens for studying how legal‐system development shapes trade credit. Disentangling demand and supply channels, we propose a new theoretical framework that elucidates the mechanisms through which judicial reform influences trade credit, which helps reconcile divergent findings in prior studies and charts a path for future research. Fourth, we contribute to the nascent literature on the corporate‐governance role of trade credit. When legal institutions are weak, the “hard” disciplinary effect of trade credit as debt can degenerate into a “soft” constraint, fostering managerial opportunism. Our post‐reform evidence provides initial empirical support for the governance role of trade credit. Finally, from a policy standpoint, echoing the 20th Central Committee's call to “improve laws and judicial mechanisms for clearing arrears owed to enterprises,” our findings provide empirical guidance for building a robust corporate credit system through judicial channels and offers policy reference for future rounds of judicial reform. Future research can be extended along three dimensions. First, scholars should exploit more granular data on the incidence and magnitude of corporate arrears to advance a deeper understanding of the phenomenon. Second, accounts payable and notes payable are subject to distinct legal constraints, subsequent studies could disentangle the heterogeneous effects of judicial procedure reform on these two instruments. Third, government arrears constitute a particularly severe segment of the trade-credit problem; future work may therefore examine the governance of public-sector delinquencies from a judicial perspective.
李增福, 张济平, 连玉君. 司法资源配置优化与企业商业信用治理——来自民事诉讼程序繁简分流改革的证据[J]. 金融研究, 2025, 542(8): 93-112.
LI Zengfu, ZHANG Jiping, LIAN Yujun. Optimization of Judicial Resource Allocation and Governance of Trade Credit: Evidence from the Reform of the Division Between Complex and Simple Cases. Journal of Financial Research, 2025, 542(8): 93-112.
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