Unraveling the external financing environment-enterprise innovation nexus: A firm-level empirical analysis in China

Decheng Ji, Feifei Song and Rongxue Jin

Finance Research Letters, 2025, vol. 73, issue C

Abstract: Using the 2006–2013 data set from China's National Bureau of Statistics, this study examines the complex relationship between the external financing environment and corporate innovation, focusing on the proximity of commercial banks at different radii (5, 10, and 15 km) from firms. Results show a significant positive effect of such proximity on promoting innovation in non-state-owned enterprises, particularly among larger companies with lower debts. However, the impact on state-owned enterprises is perceptibly muted, indicating the potential for financial market reforms to act as catalysts for innovation in this sector. This underscores the importance of optimizing the external financing environment as a strategic need for promoting high-quality economic development.

Keywords: External financing environment; Enterprise innovation; Bank proximity; Financing accessibility; Financial market reform (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:73:y:2025:i:c:s1544612324016945

DOI: 10.1016/j.frl.2024.106665

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