Does development of financial markets help firm innovation? Evidence from China

Jianbo Song, Zihao Su and Xiaoqun Nie

Economic and Political Studies, 2018, vol. 6, issue 2, 194-208

Abstract: This paper examines the impact of financial market development on firm R&D investment. Using hand-collected R&D investment data of 221 high-tech firms listed in China’s small and medium-sized board in the period of 2009–2015, we find that equity financing, particularly internal cash flow, is the main source for R&D investment of high-tech firms. Mature firms make more use of debt financing than young ones and are faced with less severe financial constraints. The development of financial markets relieves the dependence of R&D investment on internal capital, and the effect is more recognisable in young firms than in mature ones. However, the constraint of debt financing is not alleviated as much as that of equity financing by financial deepening, which suggests that debt markets still need developing, and more favourable policies are necessary for innovative firms.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/20954816.2018.1463601 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:repsxx:v:6:y:2018:i:2:p:194-208

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/reps20

DOI: 10.1080/20954816.2018.1463601

Access Statistics for this article

Economic and Political Studies is currently edited by Qing He and Cunna Li

More articles in Economic and Political Studies from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().