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Bank competition, information specialization and innovation

Author

Listed:
  • Lin Tian

    (University of Electronic Science and Technology of China)

  • Liang Han

    (University of Reading)

  • Biao Mi

    (University of Reading)

Abstract

Complementary to rich existing evidence on bank competition and corporate innovation, this paper aims to investigate the impacts of bank competition on innovation efficiencies, in terms of both R&D input and output at firm level. By acknowledging the role played by information asymmetries in financing innovation, we also examine the moderating effects of information specialization at both industry and firm level on corporate innovation. Analyzing innovation and bank structure data from U.S. between 1992 and 2010, we show novel evidence that increased bank competition improves innovation efficiencies in terms of both R&D input (investment) and output (patents and profits generated by R&D). In addition, we find bank competition has a greater favorable effect on innovation for those firms with more specialized information, such as those operating in an industry with more dispersed productivity growth and those with more concentrated patent types. Overall, our findings support market power hypothesis and banking strategic theory where bank competition improves credit supply to corporate innovation.

Suggested Citation

  • Lin Tian & Liang Han & Biao Mi, 2020. "Bank competition, information specialization and innovation," Review of Quantitative Finance and Accounting, Springer, vol. 54(3), pages 1011-1035, April.
    • Handle: RePEc:kap:rqfnac:v:54:y:2020:i:3:d:10.1007_s11156-019-00815-6
    DOI: 10.1007/s11156-019-00815-6
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    Cited by:

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    3. Jing Wang & Wei Li & Arno Forst, 2021. "Product market competition, stock price informativeness, and IFRS adoption: evidence from Europe," Review of Quantitative Finance and Accounting, Springer, vol. 56(4), pages 1537-1559, May.
    4. Yelena S. Petrenko & Aktam U. Burkhanov & Liudmila A. Bukalerova & Victoria S. Ustenko, 2024. "Counter-Cyclical Approach to Change Management in Banks for the Sustainable Development of the Financial System," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 25(1), pages 31-47, September.
    5. Chen, Wen & Zhu, Yufeng & He, Zehui & Yang, Yang, 2022. "The effect of local government debt on green innovation: Evidence from Chinese listed companies," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).
    6. Hussain Khan, Habib & Kutan, Ali M., 2023. "Banking sector competition and firms’ financial constraints: Firm-Level evidence from developing economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).

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    More about this item

    Keywords

    Bank market; Competition; Corporate innovation; Efficiencies; Information specialization;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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