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Regional Financial Developments and Research and Development Investment–Cash Flow Sensitivity: Evidence on Chinese Public High†Tech Companies

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  • Jie Hu
  • Guo Li
  • Feifei Zhu

Abstract

In a sample of 485 Chinese public high†tech companies, we show that the R&D investment is significantly dependent on internal cash flow. Based on the sizable discrepancies of stock market and financial intermediary developments in the East, Middle and West regions of China, empirical estimation provides strong evidence that the financial developments in both credit and equity markets have large effects on reducing financing constraints. The effects are most significant in the financially advanced East region of China.

Suggested Citation

  • Jie Hu & Guo Li & Feifei Zhu, 2017. "Regional Financial Developments and Research and Development Investment–Cash Flow Sensitivity: Evidence on Chinese Public High†Tech Companies," International Review of Finance, International Review of Finance Ltd., vol. 17(4), pages 627-643, December.
    • Handle: RePEc:bla:irvfin:v:17:y:2017:i:4:p:627-643
    DOI: 10.1111/irfi.12122
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    Cited by:

    1. Arvid O. I. Hoffmann & Stefanie Kleimeier, 2021. "Financial disclosure readability and innovative firms' cost of debt," International Review of Finance, International Review of Finance Ltd., vol. 21(2), pages 699-713, June.
    2. Andrea TOMÁŠKOVÁ & Roman ŚMIETAŃSKI, 2021. "Industrial Property and Investment in the Research in the Business Sector – Comparative Study Czech Republic and Poland," Eastern European Journal for Regional Studies (EEJRS), Center for Studies in European Integration (CSEI), Academy of Economic Studies of Moldova (ASEM), vol. 7(1), pages 44-69, June.
    3. Hoffmann, Arvid O.I. & Kleimeier, Stefanie, 2021. "How do banks finance R&D intensive firms? the role of patents in overcoming information asymmetry✰," Finance Research Letters, Elsevier, vol. 38(C).

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