Stringent financial regulation and corporate R&D investment: Evidence from a quasi-natural experiment in China

Feiyang Gao, Yunqing Tao, Dong Chen and Yuyang Cao

Finance Research Letters, 2023, vol. 55, issue PB

Abstract: Using the first unified and stringent financial regulatory policy for the asset management industry as a quasi-natural experiment, this study identifies the causal effect of New Asset Management Regulation on corporate R&D investment by using the difference-in-differences method. We find that the implementation of NAMR can promote corporate R&D investment, which supports regulatory effectiveness. The mechanism tests show that the implementation of NAMR reduces firm financialization and alleviates financing constraints, thereby increasing corporate R&D investment. The heterogeneity tests show that this effect is more pronounced in non-state-owned enterprises, firms located in the region with a higher degree of marketization, and firms with more media attention. Overall, our findings reveal that the implementation of NAMR has positive effects on corporate R&D investment, which provides fresh insights into the positive effects of stringent financial regulation.

Keywords: Stringent financial regulation; Corporate R&D investment; New asset management regulation; Firm financialization; Financing constraints (search for similar items in EconPapers)
JEL-codes: G32 G38 K23 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003057

DOI: 10.1016/j.frl.2023.103933

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