Firms and banks common ownership, economic policy uncertainty, and firms’ R&D investment: Evidence from China

Yiming Lu and Yu Wang

Finance Research Letters, 2024, vol. 60, issue C

Abstract: Based on a distinctive data set derived from the equity relationship between Chinese A-share listed firms and banks, this article conducts an empirical examination of the influence and mechanisms of common ownership between banks and firms on firms’ research and development (R&D) investment. This study reveals that the common ownership between banks and firms significantly elevates firms’ R&D investment. Furthermore, we provide evidence that common ownership works through the channel of reducing firms’ financing constraints. Additionally, during a period of high EPU, the common ownership between firms and banks assumes a more pivotal role in augmenting firms’ R&D investment. The results remain stable after a battery of robustness checks. Our research broadens and deepens extant studies on the influence of firms and banks common ownership, offering a novel perspective on the determinants of firms’ R&D investment.

Keywords: Common ownership; Economic policy uncertainty; R&D investment (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:60:y:2024:i:c:s1544612323012254

DOI: 10.1016/j.frl.2023.104853

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