Welcome to Francis Academic Press

The Frontiers of Society, Science and Technology, 2019, 1(5); doi: 10.25236/FSST.19010526.

Does financing constraints affect firms' R&D? —Evidence from Chinese listed firms

Author(s)

ZiHan Yuan, HaoYu Hou

Corresponding Author:
ZiHan Yuan
Affiliation(s)

Shanghai University, Shanghai 201800, China

Abstract

R&D investments of enterprises require long-term and sustained support of large amounts of capital. So the access to external financing resources is a key factor affecting R&D investments. This paper discusses the theoretical mechanism of the impact of financial constraints on R&D expenses. Then the panel data of 2095 A-share listed companies in China from 2012 to 2017 is used as a sample for empirical test of the impact of financial constraints on R&D based on the fixed-effect model. The results show that financing constraints have an inhibitory effect on R&D investments of enterprises. Additionally, for non-state-owned enterprises, the impact of financing constraints on R&D expenses is very significant while the impact of financial constraints is not obvious for state-owned enterprises.

Keywords

Financial constraints; Firm R&D; Innovation

Cite This Paper

ZiHan Yuan, HaoYu Hou. Does financing constraints affect firms' R&D? —Evidence from Chinese listed firms. The Frontiers of Society, Science and Technology (2019) Vol. 1 Issue 5: 144-151. https://doi.org/10.25236/FSST.19010526.

References

[1]Fazzari.S.M., Hubbard .R.G,Peterson, B.C(1988). Financing Constraints and Corporate Investment. Brooking Papers on Economic Activity, vol.1, no.1, p. 141-195.
[2]Himmelberg.C.P. and Petersen.B.C(1994). R&D and Internal Finance: A Panel study of small firms in high-tech industries. Review of Economics and Statistics, vol.76, no.1, p. 38-51.
[3]Claessens.S, Laven.L(2003). Financial development, property rights, and growth. J. The Journal of Finance, vol.58, no.6, p. 2401-2436.
[4]Hall.B.H, Lerner. J(2010). The Financing of R&D and Innovation. Handbook of the Economics of Innovation, North Holland: Elsevier.
[5]Amore.M.D,Schneider. C,Zaldokas.A(2013). Credit supply and corporateinnovation.   J. Financ. Econ, no.109, p. 835-855.
[6]Nanda.R, Nicholas.T(2014). Did bank distress stifle innovation during the great depression?. J. Financial Economics, no.114, p.273-292.
[7]Guariglia.A, Liu.P(2014). To what extent do financing constraints affect Chinese firms’innovation activities?.International Review of Financial Analysis, no.36, p. 223-240.
[8]Howell. S.T(2015). Financing Constraints as Barriers to Innovation: Evidence from R&D Grants to Energy Startups. J. SSRN Electronic Journal.
[9]Zhang.D.,Liu.D(2017). Determinants of the capital structure of Chinese non-listed enterprises: is TFP efficient? Economic System, no.41, p.179-202.
[10]Héricourt.J, Poncet.S(2009). FDI and credit constraints: Firm level evidence in China. Economic Systems, vol.33, no.1, p.1-21.
[11]Poncet.S, Steingress.W., Vandenbussche.H(2010). Financial constraints in China: Firm-level evidence. China Economic Review, vol.21, no.3, p.411-422.
[12]Chen.M, Guariglia.A(2013). Internal financial constraints and firm productivity in China: do liquidity and export behavior make a difference? J. Comp. Econ, no.41, p.1123-1140.
[13]Allen.F., Qian. J, Qian, M(2005). Law, finance, and economic growth in China. J. Financ. Econ, no.77, p.57-116.
[14]Kornai.J., Maskin, E. and Roland, G(2003). Understanding the Soft Budget Constraint, Journal of Economic Literature, vol.41, no.4), p. 1095-1136.
[15]Shleifer. A,Vishny. R.W(1994). Politicians and Firms. Quarterly Journal of Economics, vol.109, no.4, p.995-1025.