Professor Minggui Yu, the co-director of the base ,has published a collaborative paper titled "Bankruptcy Enforcement and Firm’s Employment： Evidence from the Judicial Reform of Enterprise Bankruptcy" in the Issue 4, 2025 of Journal of Quantitative & Technological Economics. This journal is recognized as an A (A-) category journal in economics by Zhongnan University of Economics and Law.

Abstract：Summary: Employment serves as a cornerstone of social stability and economic development, However, challenges such as automation, structural adjustments, external shocks, and the COVlD-19 pandemic have intensified employment pressures in chinaThis underscores the urgency to implement targeted policies to promote youth employment. In response, the 20th National Congress of the Communist Party of China proposed an employment-first strategy to enhance employment policies. firms, as major contribuors to employment, require incentives and capacities to maintain stable labor engagement. However, employment stabilization polices can also lead to government intervention in market exits, particulaly when bankruptcy processes fal to rescue distressed firms oproperly reallocate employees. Local governments tend to support financialy troubled firms for social stability, which, while preventng market exits in the short term, can inadvertently foster "zombie firms," crowd out employment growth in viable firms, and suppre!s long-term economic potential. Compared to governmental interventions, rule-of-law-based mechanisms are better suited to uphod market principles. Nevertheless, whether legal reforms can address employment stabilization efectively remains uncertain, as existing literature provides limited insights on this issue.This study examines the relationship between the construction of corporate exit irstitutions and employment, leveraging the 2014 pilot program for reforming bankruptcy adjudication initiated by the The supreme Feople’ s Court of the People’s Republic of china.. Using firm-level data from 2009 to 2019, this study employs a difference-in-differences (DlD) framework to evaluate the impact of the reform on employment of listed firms. The results reveal that the reform promoted firm employment, with firms in pilot regions experiencing an average increase in employment size of approximately 7.1% relative to firms in non-pilot regions, Mechanism analyses indicate that the increase in control transfer risks is the main channel. Specifically, he threat of control by powerful creditors prompts firms to shift thelr input demand from capital to labor, Heterogeneity analyses show that the iob-promotion effects were particularly pronounced in firms with high capital intensity, elevated pre-reform default risks significant insider ownership, easily enforceable assets, and those in regions with heightened political promotion pressures. finaly, thestudy finds that, due to the attention of powerful creditors, the bankruptcy judicial reform did not significantly impact total cash expenditure for compensation, instead driving firms to expand employment scale rather than upgrade human capital. This study makes three key contributions to the literature on the economic consequences of china’s bankruptcy judicial reform. first, it shifts the focus rom the capital market to the labor market, offering new insights into how legal reforms infuence employment decisions. Second, leveraging the quasi-natural experiment of the 2014 pilot program for reforming bankruptcy adjudication, it identifies control rights transfer risks as a critical mechanism driving firms to reallocate inputs from capital to labor, thereby enriching the theoretical understarding of input adjustment mechanisms. Third, this study underscores the practical implications for policymakers, highlighting that whie such reforms effectively expand employment, they do not necessarily upgrade labor quality. future policies should aim to balance employment quantity with quality improvements to foster sustainable employment growth.

Keywords：Judicial Reform of Bankruptcy; Corporate Employment; Creditor

LINK：https://doi.org/10.13653/j.cnki.jqte.20250226.004

Author profile

Minggui Yu is the Dean of the School of Finance at Zhongnan University of Economics and Law, a second-grade professor, doctoral supervisor, Chief Expert of Major Projects of the National Social Science Fund, and an Outstanding Talent of the New Century by the Ministry of Education. His research areas include Digital Finance, Finance and Artificial Intelligence, Corporate Finance, and Finance and Innovation. He has published over 90 academic papers in authoritative domestic and international journals such as Economic Research, Management World, The World Economy, China Economic Quarterly, Journal of Financial Research, China Industrial Economics, Accounting and Finance, Pacific-Basin Finance Journal, and Economic Modelling. He has led more than 10 research projects, including Major Projects and Key Projects of the National Social Science Fund, and projects of the National Natural Science Fund.

Lin Ma, Ph.D. Candidate, Department of Finance, The Chinese University of Hong Kong.

Haofan Qiang (Corresponding Author), Ph.D. Candidate, School of Economics, Fudan University.