Interest Rate Marketization, Financing Constraints and R&D Investments: Evidence from China

Abstract

Under the background of the initial completion of Chinese interest rate marketization process, this paper aims to test the actual impact of interest rate marketization on micro-enterprise research and development (R&D) investments financing. Based on the current situation, we put forward the assumption that Chinese enterprises are generally facing financing constraints in R&D investment. The interest rate marketization, which reduced government intervention in fund pricing, helps alleviate financing constraints, especially for non-state-owned enterprises. This paper focuses on the moderating effect of interest rate marketization on financing constraints and R&D investments. The interest rate marketization index is constructed from three indicators: interest rate determination ways, interest rate fluctuation restrictions, and real interest rate level. We use the Euler-equation investment model to test the financing constraints of R&D investment. Based on panel data of listed firms for 2007–2016, we find that R&D investment faces wide financing constraints, and interest rate marketization alleviates financing constraints. More specifically, financing constraints are more significant for non-state-owned firms than for state-owned enterprises, and the deepening marketization of interest rates can effectively alleviate the financing constraints of non-state-owned enterprises.

Institutional Pressures and Corporate Green Innovation; Empirical Evidence from Chinese Manufacturing Enterprises

“…The resource-based view is that a firm's behavior is determined by its resource base, with its commensurate response to institutional pressures depending on resource adequacy [41]. As enterprises in regions that have high marketization are able to obtain the innovation resources they need from the market, the possibility of "market failure" is low because: (1) to promote R&D capital accumulation, social funds can be invested in enterprise R&D activities through financial institutions [42]; (2) the competition mechanism is the confidence commitment the market transmits to the enterprise, which encourages the enterprise to pay greater attention to R&D quality and efficiency [43]; and (3) in high marketization regions, improvements in the legal system and the development of intermediary market organizations both strengthens the protection of the enterprise intellectual property rights, which stimulates R&D innovations, and shortens the enterprise innovation cycle due to unimpeded R&D overflow channels [44]. Therefore, compared to regions with low marketization, when enterprises are able to obtain the innovation resources needed from the market, the institutional pressure effect is enhanced.…”

A Three-Stage Game Analysis of Private Lending Rate Ceiling: Necessity, Impact, and Solution

“…Interest rate marketization has been advocated by many scholars [18,19], who argue that interest rates should be more determined by supply and demand and the profitability of participants, and our study adds that, in the individual lending market, interest rate ceiling should be established to ensure market stability, which is an evolutionary choice.…”

Postgraduate Education of Board Members and R&D Investment—Evidence from China

“…What factors will influence enterprises' innovation on research and development? Previous research has found that influential factors of research and development include external economic and political environments [10], such as macroeconomic volatility [11], interest rate marketization [12], political instability [13], judicial system [14], and the nature of business [15]. However, according to many studies since the innovation theory was proposed by Joseph Schumpeter, enterprises do not focus on external influencing factors only.…”