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From red tape to innovation: How does municipal government financing reform affect corporate R&D activities?

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  • Kai Wu
  • Dingyao Guo

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.

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  • Kai Wu & Dingyao Guo, 2024. "From red tape to innovation: How does municipal government financing reform affect corporate R&D activities?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(4), pages 3387-3417, December.
    • Handle: RePEc:bla:acctfi:v:64:y:2024:i:4:p:3387-3417
    DOI: 10.1111/acfi.13256
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