Corporate's excess bank loans and litigation risk

The determinants of litigation risk have received much attention from academics, while the study from the perspective of corporate financing is limited. This paper explores the relation between excess bank loans and litigation risk using Chinese A-share listed corporates from 2003 to 2015. The empirical results show that the excess bank loans are significant positive with litigation risk while the improvement of internal control as well as the improvement of regional legal environment can weaken the positive correlation. Besides, internal control quality and regional legal environment can substitute for each other in the process of weakening the relationship. This paper extends the research perspective of determinants of litigation risk from excess bank loans and also enriches the research of the effects of macro environment on corporate behavior combining internal control quality and regional legal environment.