Financial risk under differences in legal efficiency: An analysis of the moderating effect of judicial transparency

• Law efficiency significantly reduces financial risks. • Judicial transparency moderates the link between law efficiency and financial risks. • The impact of law efficiency on financial risks varies by population density. • The impact of law efficiency on financial risks varies by social consumption. With the rapid development of China's financial system and the intensification of regional disparities, the prevention and control of financial risks is facing new institutional challenges. Based on provincial panel data from China spanning 2011 to 2023, this paper empirically examines the impact of rule of law efficiency on financial risks and introduces judicial transparency to explore its moderating role in the relationship between rule of law efficiency and financial risks. The study finds that rule of law efficiency has a significant negative effect on financial risks. In addition, judicial transparency not only helps to reduce financial risks, but also plays a moderating role in the relationship between rule of law efficiency and financial risks. Heterogeneity analysis shows that the negative effect of rule of law efficiency on financial risks is more pronounced in regions with low population density and low levels of social consumption. This paper provides empirical evidence and policy implications for improving regional financial governance systems and the construction of the rule of law environment.