This study examines the influence of bankruptcy courts on the risk-taking behavior of listed firms in China between 2002 and 2019. The establishment of bankruptcy courts discourages listed firms from taking excessive risk. This effect is more pronounced in firms with financing constraints, high market valuations, and those operating in regions with a weaker rule of law. Overall, our findings indicate that establishing bankruptcy courts benefits creditors’ rights and restrains corporate risk-taking. •The influence of bankruptcy courts on corporate risk-taking is examined.•The establishment of bankruptcy courts discourages firms from taking excessive risk.•The effect is more pronounced in firms with financial constraints.•The effect is also stronger in areas with weak rule of law.