Banks’ Governance and Innovation: Evidence from the Listed Firms in China

Yanjian Zhu

Emerging Markets Finance and Trade, 2019, vol. 55, issue 11, 2409-2424

Abstract: The article investigates the relationship between banks, agency costs, and innovation ability of listed firms. The role of banks in affecting innovation is a very important topic especially in China where banks play more important roles than equity markets. We find that banks providing short-term funds to listed non-high-tech firms dampen their innovation ability significantly. However, the relationship between short-term loans and innovation ability in high-tech firms is insignificant. The effects of short-term loans on innovation ability are significantly different between high-tech and non-high-tech firms. Further examination shows that high-tech firms with more short-term bank loans have significantly less abnormal management expenses than non-high-tech firms in the next year. The reduced abnormal management expenses in the next year significantly enhance the innovation ability in the year after next.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:55:y:2019:i:11:p:2409-2424

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DOI: 10.1080/1540496X.2018.1483229

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