Online judicial auction, loan availability, and corporate investment in China

Online judicial auctions can significantly impact corporate investment by enhancing creditor protection and facilitating loan availability. Using a dynamic difference-in-differences strategy, we find that the reform significantly boosts corporate investment. Mechanism tests reveal that the reform boosts corporate investment by improving corporate loan availability and creditors' willingness to lend. The effect is more pronounced in regions with high judicial auction turnover, high public participation, poorer legal environments, and lower banking competition, suggesting that these reforms enhance legal system efficiency and market competition. Additionally, we find that judicial auction reform reduces firms’ precautionary savings and fosters regional economic development. Overall, our study contributes to understanding the important role of creditor protection in corporate investment and provides insights for implementing digital judicial reforms. •This paper investigates whether strengthened creditor protection affects corporate investment.•The results show that Internet judicial auctions significantly increase corporate investment.•Mechanism analysis indicates the policy improves corporate loan availability and creditors' willingness to lend.•These reforms enhance legal system efficiency and market competition.•Further analysis suggests the policy reduces firms' precautionary savings and fosters regional economic development.