Do credit market accessibility and legal protection shape corporate innovation?

We examine the effects of credit market accessibility and legal protection on corporate innovation in a pseudo‐multinational setting at the firm level, emphasizing the channels through which corporate innovation is affected. A horse race suggests that credit market accessibility facilitates innovati...

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Bibliographic Details
Published in:The Journal of financial research 2022-10, Vol.45 (3), p.719-754
Main Authors: Shen, Danlin, Chen, Carl R., Yan, Xinyan, Yi, Zhihong
Format: Article
Language:English
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Summary:We examine the effects of credit market accessibility and legal protection on corporate innovation in a pseudo‐multinational setting at the firm level, emphasizing the channels through which corporate innovation is affected. A horse race suggests that credit market accessibility facilitates innovation more than legal protection does. Credit market accessibility promotes innovation by alleviating financial constraints through reduced bank loan costs, larger bank loans, and more long‐term loans. Consistent with our reasoning, the effects are greater for private enterprises than for state‐owned firms.
ISSN:0270-2592
1475-6803
DOI:10.1111/jfir.12297