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Stringent financial regulation and corporate R&D investment: Evidence from a quasi-natural experiment in China

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  • Gao, Feiyang
  • Tao, Yunqing
  • Chen, Dong
  • Cao, Yuyang

Abstract

Using the first unified and stringent financial regulatory policy for the asset management industry as a quasi-natural experiment, this study identifies the causal effect of New Asset Management Regulation on corporate R&D investment by using the difference-in-differences method. We find that the implementation of NAMR can promote corporate R&D investment, which supports regulatory effectiveness. The mechanism tests show that the implementation of NAMR reduces firm financialization and alleviates financing constraints, thereby increasing corporate R&D investment. The heterogeneity tests show that this effect is more pronounced in non-state-owned enterprises, firms located in the region with a higher degree of marketization, and firms with more media attention. Overall, our findings reveal that the implementation of NAMR has positive effects on corporate R&D investment, which provides fresh insights into the positive effects of stringent financial regulation.

Suggested Citation

  • Gao, Feiyang & Tao, Yunqing & Chen, Dong & Cao, Yuyang, 2023. "Stringent financial regulation and corporate R&D investment: Evidence from a quasi-natural experiment in China," Finance Research Letters, Elsevier, vol. 55(PB).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003057
    DOI: 10.1016/j.frl.2023.103933
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    More about this item

    Keywords

    Stringent financial regulation; Corporate R&D investment; New asset management regulation; Firm financialization; Financing constraints;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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