RESEARCH ARTICLE
From red tape to innovation: How does municipal government financing reform affect corporate R&D activities?
Kai Wu,
Dingyao Guo,
Corresponding Author
Kai Wu
School of Finance, Central University of Finance and Economics, Beijing, China
Correspondence
Kai Wu, School of Finance, Central University of Finance and Economics, Beijing 102206, China.
Email: [email protected]
Search for more papers by this authorDingyao Guo
National University of Singapore, Singapore, Singapore
Search for more papers by this authorKai Wu,
Dingyao Guo,
Corresponding Author
Kai Wu
School of Finance, Central University of Finance and Economics, Beijing, China
Correspondence
Kai Wu, School of Finance, Central University of Finance and Economics, Beijing 102206, China.
Email: [email protected]
Search for more papers by this authorDingyao Guo
National University of Singapore, Singapore, Singapore
Search for more papers by this authorFirst published: 12 April 2024
Abstract
We evaluated the effect of an exogenous shock on municipal government debt financing reform on corporate innovation for a sample of Chinese-listed firms from 2009 to 2019. The results show that this reform stimulates corporate innovation capacity, and the effect is more pronounced in non-state-owned and financially constrained firms. We attribute these findings to reduced external financing costs and the crowding-out effect of a firm's real estate investment. Our results are robust to alternative variable definitions, model specifications, and estimation techniques and provide novel evidence concerning the role of municipal government financing in corporate innovation.
Open Research
DATA AVAILABILITY STATEMENT
The data that support the findings of this study are available from the corresponding author upon reasonable request.
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