Judicial Independence on Corporate Risk-taking based on the Quasi-natural Experiment of Province High Court’s Offsite Exchange

Judicial independence is an important means to strengthen the construction of the legal system, and its economic consequences have attracted much attention. Based on the quasi-natural experiment of judges' cross-regional exchanges in 2013 and using data from listed companies from 2009 to 2016, this paper explores the impact of judicial independence on corporate risk-taking. We find that there is a negative relationship between judicial independence and corporate risk-taking, and this conclusion remains valid after multiple robustness tests. Furthermore, the inhibitory effect of judicial independence on corporate risk-taking is more pronounced in companies with higher analyst pressure, higher retail investor pressure, or the presence of institutional selling. Mechanism analysis shows that judicial independence inhibits corporate risk-taking by increasing the amount of litigation and reducing net profit. These results are consistent with the logic that corporate managers reduce corporate risk-taking to alleviate performance pressure. This study provides a new perspective and strong evidence for the economic consequences of judicial independence.