The 313th Wenlan Financial Forum

Abstract：

Because corporate limited liability protects founders' personal assets, creditors often require founders of new, small and risky firms to contract around limited liability by pledging their personal assets as collateral for loans to their firms. This makes personal bankruptcy law (PBL) relevant to corporate finance. We find that pro-debtor PBL reforms increase the number of patents filed, citations to those patents, and début patents by firms with no previous patents. These reforms also redistribute innovation across industries in closer alignment to its distribution in the U.S., which we take to approximate industry innovative potential. These effects are driven by firms without histories of high-intensity patenting, and are damped in countries that impose minimum capital requirements on new firms. Firms with largescale legacy technology may avoid radical innovations that devalue that technology. Consequently, new, initially small and risky firms often develop the disruptive innovations that contribute most to economic growth. Consistent with this, we also find pro-debtor PBL reforms increasing value-added growth rates across all industries, and by larger margins in industries with more innovation potential. Our difference-in-differences regressions use patents and PBL reforms for 33 countries from 1990 to 2002, with subsequent years used to measure citations to patents in this period.

Speaker Introduction：

Zhao Rong, professor and doctoral supervisor at Wenlan School of Business, Zhongnan University of Economics and Law. He has previously served as an associate professor at Southwest University of Finance and Economics and Nanjing Audit University. His research areas include enterprise innovation, corporate finance, and population mobility. He has published over 30 academic papers in renowned domestic and international SSCI and SCI journals in economics, finance, and management, such as Management World, China Economic Quarterly, Journal of Financial Research, Science Research Management, Research Policy, Small Business Economics, Journal of Comparative Economics, China Economic Review, European Financial Management, Pacific-Basin Finance Journal, and Journal of Housing Economics.