Capital Credit and Corporate Innovation: Evidence from Removing Minimum Capital Requirements

Yizhe Gu ()
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Yizhe Gu: Zhejiang University of Technology

A chapter in Proceedings of the 2025 4th International Conference on Public Service, Economic Management and Sustainable Development (PESD 2025), 2025, pp 382-391 from Springer

Abstract: Abstract This study investigates the impact the capital credit on corporate innovation activities, focusing on firms in industries with high entry rates. We use removing minimum capital requirements(RMCR) as a quasi-natural experiment and find that in high entry rate industries, the implementation of RMCR significantly promotes corporate innovation. Mechanism tests indicate that this effect operates primarily by alleviating firms’ financing constraints and by improving resource allocation. We confirm the robustness of our results by clustering standard errors at alternative levels and by excluding data from the policy implementation year. Our findings enrich the literature on the economic consequences of the RMCR and provide new evidence on how institutional reforms shape firm-level innovation, with implications for ongoing business registration reforms and innovation-driven economic growth.

Keywords: Subscribed capital system; Enterprise innovation; RMCR; Financing constraints; Resource allocation (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-916-2_42

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DOI: 10.2991/978-94-6463-916-2_42

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