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Do credit market accessibility and legal protection shape corporate innovation?

Author

Listed:
  • Danlin Shen
  • Carl R. Chen
  • Xinyan Yan
  • Zhihong Yi

Abstract

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.

Suggested Citation

  • Danlin Shen & Carl R. Chen & Xinyan Yan & Zhihong Yi, 2022. "Do credit market accessibility and legal protection shape corporate innovation?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 45(3), pages 719-754, September.
    • Handle: RePEc:bla:jfnres:v:45:y:2022:i:3:p:719-754
    DOI: 10.1111/jfir.12297
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