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Mathematical analysis of civil litigation and empirical research of corporate governance

Junling Liu
Junling Liu
 and 
Steven Formaneck
Steven Formaneck
   | Apr 08, 2022
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Published Online: Apr 08, 2022
Page range: 731 - 744
Received: May 29, 2021
Accepted: Sep 27, 2021
DOI: https://doi.org/10.2478/amns.2022.1.00003
Keywords
© 2021 Junling Liu et al., published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 International License.

Main variable definition and its calculation.

Variable Symbol Definition and its calculation
Dependent variable Corporate governance index G Construct as Bai Chongen et al. [20]
Independent variable Proportion of sued amount LRisk (Amount involved in the case/total assets)*100
Intermediary variable OL OL (Accounts payable + notes payable + other accounts payable)/shareholder’s equity
FL FL (Short-term loan + long-term loan)/shareholder’s equity
Control variable Legal environment Law Measured by “‘market intermediary organisation and legal environment”’ in Fan Gang index
Internal strategy Strat In Wang Huacheng et al. [37], it is expressed by the arithmetic mean of six indicators, namely, the tendency to find new products, the efficiency of production and distribution, historical growth, the concentration of new products and services, organizational stability, and the commitment of technical efficiency.
Corporate culture Resp If social responsibility report is provided externally, the value is 1, otherwise it is 0.
Profitability ROA Net profit/total asset
Corporate growth Grow Sale proceeds at the end of the year/sales proceeds at the end of last year-1
Asset-liability ratio Lev Total liability/total asset
Corporate scale Size Natural logarithm of total assets
Year dummy Year If listed from t − 8 to t, Year dummy = 0, otherwise, Year dummy = 1
Industry dummy Industry According to industry classification guide of China Securities Regulatory Commission, Category C is classified by two digits, and the rest is classified by one digit, with a total of 21 industry variables

A test of intermediary role of debt financing.

Financing liability as intermediary variable OL as intermediary variable
(1) (2) (3) (4) (5) (6)
G FL G G OL G
LRisk −0.007** −0.051** −0.009** LRisk −0.007** 0.001 −0.009**
(−2.31) (−2.32) (−2.61) (−2.31) (0.14) (−2.55)
FL 0.041*** OL 0.044***
(8.63) (3.37)
LRisk*FL −0.003* LRisk*OL −0.005
(0.67) (−1.11)
Controls Control Control Control Controls Control Control Control
Year Control Control Control Year Control Control Control
Industry Control Control Control Industry Control Control Control
Constant −1.338*** −13.989*** −0.848** Constant −1.338*** 0.610 −1.293***
(−3.38) (−5.23) (−2.21) (−3.38) (0.49) (−3.25)
N 982 982 982 N 982 982 982
Adj. R2 0.234 0.174 0.300 Adj. R2 0.234 0.083 0.243

Lawsuits description (times/billion yuan).

Total sample Different cause of action The incorporation and jurisdiction
Capital Product In the same prefecture Not in the same prefecture
Year Sued times Amount involved Sued times Amount involved Sued times Amount involved Sued times Amount involved Sued times Amount involved
2011 49 4.359 12 0.514 5 3.418 13 0.561 36 3.798
2012 84 1.817 13 0.63 10 0.802 14 0.886 70 0.931
2013 175 3.631 20 1.9 26 0.808 58 2.216 117 1.415
2014 322 6.452 50 2.092 24 2.586 60 4.35 262 2.102
2015 325 3.165 27 1.398 23 0.642 52 1.988 273 1.177
2016 1484 8.935 50 3.291 28 1.532 872 3.885 612 5.05
2017 237 19.285 56 7.908 48 3.082 148 13.924 89 5.361
2018 629 36.323 378 28.095 126 5.149 495 27.767 134 8.556
Total 3305 83.967 606 45.828 290 18.019 1712 55.577 1593 28.39

The moderating role of civil litigation types and judicial local protectionism.

(1) (2)
G G
LRisk −0.013*** (−2.74) −0.007* (−1.91)
LP 0.029 (0.80)
LRisk*LP 0.004* (0.38)
ToC −0.005 (−0.13)
LRisk*ToC −0.010** (−1.49)
Year Control Control
Industry Control Control
Constant −1.363*** (−3.44) −1.435*** (−3.55)
N 982 982
Adj. R2 0.235 0.233

Endogeneity and robustness test.

(1) (2) (3) (4) (5)
G G G-Dual G G
LRisk −0.010*** −0.008** −0.001* −0.023* −0.007**
(−1.56) (−0.30) (−0.01) (−1.98) (−0.45)
IMR 0.0574
(0.38)
Controls Control Control Control Control Control
Year Control Control Control Control Control
Industry Control Control Control Control
Constant −2.469*** −1.077*** −1.853*** −1.323*** −1.006***
(−5.66) (−2.83) (−5.36) (−3.36) (−2.68)
N 618 982 982 982 982
Adj. R2 0.205 0.230 0.173 0.256 0.152

Variable description.

Variable Sample size Mean Standard deviation Minimum Maximum
G 982 0.0314 0.5384 −1.0274 2.1878
LRisk 982 2.6402 7.7834 0.0001 106.6978
OL 982 0.6708 3.5338 −76.6759 56.4142
FL 982 1.0515 6.7368 −73.9349 162.8783
Law 982 8.9192 4.6887 −0.2 16.94
Strate 982 215.6843 303.1892 1.1966 2479.183
Resp 982 0.0478 0.2135 0 1
Growth 982 0.054 0.8408 −1 15.8560
ROA 982 −7.6465 136.6108 −2474.181 0.3127
Lev 982 0.8465 3.5150 0.0702 63.9712
Size 982 22.2609 1.3118 17.2770 26.2169

Civil litigation and corporate governance.

(1) (2)
G G
LRisk −0.007** (−2.29)
Law −0.006 (−1.56) −0.006 (−1.58)
Strate 0.016*** (2.30) 0.014*** (2.20)
Resp 0.111 (1.51) 0.110 (1.51)
Growth −0.061** (−1.96) −0.061** (−1.99)
ROA −0.112** (−2.15) −0.094* (−1.80)
Lev −0.118** (−2.10) −0.122** (−2.17)
Size 0.058*** (3.56) 0.068*** (4.05)
Year Control Control
Industry Control Control
Constant −1.085*** (−2.85) −1.341*** (−3.39)
N 982 982
Adj. R2 0.231 0.234
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