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Firms and banks common ownership, economic policy uncertainty, and firms’ R&D investment: Evidence from China

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  • Lu, Yiming
  • Wang, Yu

Abstract

Based on a distinctive data set derived from the equity relationship between Chinese A-share listed firms and banks, this article conducts an empirical examination of the influence and mechanisms of common ownership between banks and firms on firms’ research and development (R&D) investment. This study reveals that the common ownership between banks and firms significantly elevates firms’ R&D investment. Furthermore, we provide evidence that common ownership works through the channel of reducing firms’ financing constraints. Additionally, during a period of high EPU, the common ownership between firms and banks assumes a more pivotal role in augmenting firms’ R&D investment. The results remain stable after a battery of robustness checks. Our research broadens and deepens extant studies on the influence of firms and banks common ownership, offering a novel perspective on the determinants of firms’ R&D investment.

Suggested Citation

  • Lu, Yiming & Wang, Yu, 2024. "Firms and banks common ownership, economic policy uncertainty, and firms’ R&D investment: Evidence from China," Finance Research Letters, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:finlet:v:60:y:2024:i:c:s1544612323012254
    DOI: 10.1016/j.frl.2023.104853
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