A Research On The Impact Of Judicial Litigation On Corporate Financial Constraints

With the rapid development of economy,the process of legal system and the judicial system in China have also been progressing steadily and constantly being perfected.The progress of the legal system has provided a better guarantee for the rights protection of Chinese enterprises,but also brought more challenges.At the same time,despite that China's economy has been developing rapidly,"Financing difficulties" has been a hot topic that has been troubling enterprises on how to maintain a sustainable and healthy development.In credit and capital markets,reputation and information disclosure play an important role in whether an enterprise can meet financing requirements and ultimately receive funds.This paper takes the 2003-2017 Shanghai and Shenzhen A-share listed enterprises as samples.And we obtain data about enterprise litigation arbitration and finance by manually collecting and collating data from CSMAR and China Research Data Service Platform(CNRDS).Based on the data,this paper studies the relationship between litigation and corporate financing constraints.This paper also further discusses whether the enterprise nature and charitable donation will influence this relationship.Besides,we try to explain and empirically test the mechanism of litigation's influence on financing constraints.First of all,this paper sorts out the influencing factors of financing constraints and the relevant literature on the impact of litigation on corporate finance.In the variable description part,this paper collects and collates the relevant data of the A-share listed company litigation arbitration,and calculates the SA index which measures the financing constraint.At the same time,detailed descriptive statistics are made on the sued cases and financing constraints of enterprises.In the part of empirical analysis,this paper uses the regression model to study the relationship between litigation and corporate financing constraints.The results show that :(1)there is a significant positive correlation between litigation risk and corporate financing constraint.That is,with the increase of corporate litigation risk,corporate financing constraint is also greater;(2)No matter the enterprise is state-owned or not,litigation risk will have a negative impact on corporate financing constraints.Nevertheless,state-owned enterprises are less affected;(3)In private enterprises,no matter they have political or financial association or not,litigation risk is significantly positively correlated with corporate financing constraints.However,enterprises with political or financial association are less affected;(4)Corporate charitable donation can effectively alleviate the negative impact of litigation on financing constraints;(5)according to empirical test,litigation risk does act on corporate financing constraints through the mechanism of information asymmetry.In the robustness test part,this paper conducted the robustness test of the research conclusion through four methods,namely,the Heckman two-stage model,the transformation of the main regression model,the new construction method of the explained variable SA index,and the use of small sample data.Under different conditions,the research conclusion is still robust.In the conclusion part,the basic conclusions of this paper are summarized.In addition,suggestions are put forward from the perspectives of enterprises,governments,financial institutions and investors.Through the empirical study of the relationship between litigation risk and financing constraint,this paper enriches the research on the relationship between litigation and financing.Moreover,the paper empirically examines the impact of litigation risk on corporate financing constraints under different ownership properties and different informal systems(political and financial),providing a new perspective for the study of corporate financing constraints.In addition,this paper also studies the effect of corporate charitable donation after litigation.In order to prove the path of litigation risk acting on corporate financing constraint,this paper empirically tests the transmission mechanism of information asymmetry.