Does financial constraints alleviation effectively promote firm innovation?Evidence from a quasi-experiment on credit expansion
The constraints of financing are widely regarded as a key factor limiting firms'inno-vation.However,whether easing these constraints always promotes innovation is still a matter of debate.Given that the Chinese financial system relies primarily on bank credit,this paper mainly examines whether credit expansion can significantly promote firms'innovation and ana-lyzes its mechanism.Using the implementation of the"removal of the deposit interest rate limit"policy as an exogenous shock of credit expansion,this paper constructs a difference-in-differences(DID)model for empirical testing.The analysis shows that the bank deposit competition effect brought by the policy implementation significantly increases the loan size obtained by private enterprises relative to non-private enterprises.However,there is no significant change in inno-vation input and output by enterprises after obtaining additional credit resources.The results remain unchanged in samples with greater innovation demand,such as high-tech enterprises and emerging strategic enterprises,and are insensitive to the degree of intellectual property protec-tion in different regions and the loan term structure obtained by enterprises.Further analysis find that enterprises allocate more financial assets,especially short-term financial assets,after credit expansion,indicating that a lack of subjective willingness for innovation is more likely to be the reason why credit expansion does not bring about new firms'innovation.This article re-veals that promoting innovation cannot rely solely on credit expansion,but should be combined with innovation-driven strategies,improved innovation environment,and reduced short-sighted behavior of enterprises to promote innovation by enhancing relative returns on innovation.
credit expansionfirms'innovationfirms'financializationremoval of the deposit rate ceiling