Does financial market liberalization promote corporate radical innovation? Evidence from China

Xiao-Lin Li and Deng-Kui Si

International Review of Financial Analysis, 2024, vol. 95, issue PB

Abstract: This paper investigates the impact of financial market liberalization on corporate radical innovation using Chinese non-financial firm-level data from 2000 to 2022. The results show that increased financial market liberalization promotes corporate radical innovation by alleviating financing constraints, enhancing capital allocation efficiency, and improving credit allocation quality. These findings remain robust even after replacing variable measurements, changing model specifications, and addressing endogeneity concerns. The positive impact of financial market liberalization on corporate radical innovation is more pronounced for firms facing higher financing constraints, governance efficiency, information asymmetry, marketization, and capital intensity. Our study underscores the critical role of thoughtful financial market reforms in driving high-quality corporate development.

Keywords: Financial market liberalization; Corporate radical innovation; Financing constraints; Capital allocation efficiency; Credit allocation quality (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:95:y:2024:i:pb:s1057521924004320

DOI: 10.1016/j.irfa.2024.103500

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