How does creditor protection improve access to corporate credit?

This paper examines the establishment of bankruptcy courts, a mechanism for creditor protection, and its impact on corporate credit accessibility. The establishment of specialist bankruptcy courts positively influences credit accessibility. This research utilizes data from 2016 to 2023 to demonstrate that bankruptcy courts enhance credit accessibility primarily through two strategies. Bankruptcy courts bolster entrepreneurial confidence by mitigating the uncertainty associated with business loss, while simultaneously alleviating information asymmetry through the provision of institutionalized transparency in bankruptcy processes. The advantage is more pronounced in capital-intensive firms with physical assets aligned with their legal protections. The benefits diminish in enterprises with significant ties to banks that offer an efficient informal lending system.This paper enhances theoretical comprehension of the interplay between formal institutions, company attributes, and financing results.