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Nonlinear Effect of Financial Efficiency and Financial Competition on Heterogeneous Firm R&D: A Study on the Combined Perspective of Financial Quantity Expansion and Quality Development

Yang Gao (), Yu Wang (), Chien-Chi Chu (), Sang-Bing Tsai (), Xiaomin Du () and Quan Chen ()
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Yang Gao: School of Business, Dalian University of Technology, Panjin 124221, China
Yu Wang: School of Business, Dalian University of Technology, Panjin 124221, China
Chien-Chi Chu: Department of Finance, Business School, Shantou University, Shantou 515063, China
Sang-Bing Tsai: Zhongshan Institute, University of Electronic Science and Technology, Zhongshan 528400, China
Xiaomin Du: Department of Economic Management, Yingkou Institute of Technology, Yingkou 115014, China
Quan Chen: Zhongshan Institute, University of Electronic Science and Technology, Zhongshan 528400, China

Sustainability, 2018, vol. 10, issue 5, 1-15

Abstract: Manufacturing firm data and district financial quantity and quality indicators for 2005–2007 combined with heterogeneous firm characteristics were used with a threshold panel to study the effect of financial inefficiency on firm R&D and the financial boundaries of efficiency improvement. The results show that: (1) extensive financial quantity expansion cannot support high innovation efficiency R&D (Research and Development) activities in private enterprises, low- and medium-technology enterprises, and underdeveloped area enterprises, as it causes financial inefficiency problems and a shortage of R&D inputs; and (2) financial efficiency and financial competition have nonlinear effects on firm R&D. Financial inefficiency and either low or excessive financial competition result in a lack of highly efficient firm R&D. Only improvements in financial efficiency and moderate competition can significantly promote firm R&D. The results of this study reveal an important way to improve the influence of financial inefficiency on firm R&D by moving away from simply expanding financial quantity to promoting quality instead.

Keywords: financial efficiency; financial competition; heterogeneity; threshold panel; sustainable finance; financial innovation (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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