Can stronger capital markets regulation increase the level of R&D investments?

Yong Zhao and Shihui Cheng

International Review of Financial Analysis, 2025, vol. 102, issue C

Abstract: In today's global economic environment, technological innovation and advancement in science and technology have become the key drivers of economic growth and competitiveness for all countries. In recent years, the regulatory system of China's capital market has been continuously improved, and the intensity of regulation has been increasing, aiming at enhancing market transparency, protecting investors' rights and interests, and standardizing the market order, etc., and achieving remarkable results. The promulgation and implementation of the new Securities Law has laid a legal foundation for the further deepening of the policy of strong capital market regulation. Therefore, this study constructs a double-difference model with the introduction of the new Securities Law to investigate the impact of strong capital market regulation on the level of R&D investment of enterprises, and the results show that strong capital market regulation can prompt enterprises to increase their R&D investment, improve their innovation ability and competitiveness, and promote the sustainable development of enterprises. In addition, media attention and digital transformation play an important moderating role in the impact of strong capital market regulation on the level of R&D investment of enterprises, which strengthens the positive effect of capital market regulation. In this context, by studying the impact of strong capital market regulation policies on enterprise R&D investment, we can better understand the incentive effects and constraints of regulatory policies on enterprise innovation activities, provide useful references for the formulation of more effective regulatory policies and the promotion of enterprises' continuous innovation, and provide scientific basis for further deepening the reform of the capital market and optimizing the regulatory policies, so as to promote the restructuring of China's economic structure and the technological innovation and upgrading of China's economy.

Keywords: Strong capital market regulation; firms' R&D investment levels; New securities; Mediation effects (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:102:y:2025:i:c:s1057521925000389

DOI: 10.1016/j.irfa.2025.103951

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