Financial development, financing restriction ease and firm R&D investments

Abstract

Abstract: The degree of financial development is added into the model of financing cost function and R&D investment decision model, and the theoretical mechanism of easing financing restriction to stimulate R&D investment by financial development is discussed. Based on the provincial panel data of Chinese large-and-medium sized industrial firms from 2006 to 2010, the influences and mechanism of financial development on the firm's R&D investment are tested empirically by dynamic panel model and Euler equation. The reflections of the test are as follows. (1)There is a significant positive correlation between R&D intensity and internal cash flow, indicating that the financing restriction really exists in R&D activities of industrial firms. (2)The increase of financial deepening degree can reduce the reliance on internal finance of R&D investment and intensify the functions of bank loan and paid-up capital. (3)The influence on firms' financing restriction by capital market development has no apparent effect, reflecting the imperfect functions of capital market and the fact that capital market has not become a financing channel of R&D investment in China.

Key words: financial development, financing restriction, R&D investment, Euler equation

CLC Number:

F426

Sun Xiaohua, Wang Yun, Xu Ran. Financial development, financing restriction ease and firm R&D investments[J]. Science Research Management, 2015, 36(5): 47-54.

References

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