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Banks’ Governance and Innovation: Evidence from the Listed Firms in China

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  • Yanjian Zhu

Abstract

The article investigates the relationship between banks, agency costs, and innovation ability of listed firms. The role of banks in affecting innovation is a very important topic especially in China where banks play more important roles than equity markets. We find that banks providing short-term funds to listed non-high-tech firms dampen their innovation ability significantly. However, the relationship between short-term loans and innovation ability in high-tech firms is insignificant. The effects of short-term loans on innovation ability are significantly different between high-tech and non-high-tech firms. Further examination shows that high-tech firms with more short-term bank loans have significantly less abnormal management expenses than non-high-tech firms in the next year. The reduced abnormal management expenses in the next year significantly enhance the innovation ability in the year after next.

Suggested Citation

  • Yanjian Zhu, 2019. "Banks’ Governance and Innovation: Evidence from the Listed Firms in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(11), pages 2409-2424, September.
    • Handle: RePEc:mes:emfitr:v:55:y:2019:i:11:p:2409-2424
    DOI: 10.1080/1540496X.2018.1483229
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    Cited by:

    1. Yanbo Zhang & Xiang Li, 2022. "The Impact of the Green Finance Reform and Innovation Pilot Zone on the Green Innovation—Evidence from China," IJERPH, MDPI, vol. 19(12), pages 1-20, June.
    2. Hedy Jiaying Huang & Ahsan Habib & Sophia Li Sun & Ying Liu & Huiting Guo, 2021. "Financial reporting and corporate innovation: a review of the international literature," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(4), pages 5439-5499, December.
    3. Hu, Guoqiang & Wang, Xiaoqi & Wang, Yu, 2021. "Can the green credit policy stimulate green innovation in heavily polluting enterprises? Evidence from a quasi-natural experiment in China," Energy Economics, Elsevier, vol. 98(C).

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