The impact of business environment on corporate default risk: evidence from China

We examine the relationship between business environment optimization and company default risk using unique data from the Chinese capital market. The result of our study demonstrates that business environment optimization is associated with a reduction in default risk, and this finding holds even after conducting a series of robustness tests. Mechanism analysis suggests that business environment optimization primarily reduces default risk through enhancing total factor productivity and lowering operational risk. The findings of this study highlight the importance of a favourable business environment for achieving high-quality and healthy economic development.