IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v44y2023i5p2615-2625.html
   My bibliography  Save this article

Bank credit and corporate innovation investment: The role of government risk sharing

Author

Listed:
  • Zhi Lin
  • Xiaoyong Lu

Abstract

This paper builds a difference‐in‐difference model (DID) to study the impact of government risk sharing policies on corporate innovation investment. High‐tech firms are used as the experimental group to test the effect of policy shocks. It is shown that government risk sharing may ease financing constrains, which will increase corporate innovation investment. The results suggest that the effect of government risk‐sharing policies on bank credit is short‐run, while the effect on corporate innovation investment is more sustainable. In addition, the government risk‐sharing ratio is inversely proportional to the loan rates and the success rate of innovation.

Suggested Citation

  • Zhi Lin & Xiaoyong Lu, 2023. "Bank credit and corporate innovation investment: The role of government risk sharing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(5), pages 2615-2625, July.
    • Handle: RePEc:wly:mgtdec:v:44:y:2023:i:5:p:2615-2625
    DOI: 10.1002/mde.3837
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/mde.3837
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.3837?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Bester, Helmut, 1994. "The Role of Collateral in a Model of Debt Renegotiation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 72-86, February.
    2. Steven N. Kaplan & Luigi Zingales, 1995. "Do Financing Constraints Explain Why Investment is Correlated with Cash Flow?," NBER Working Papers 5267, National Bureau of Economic Research, Inc.
    3. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    4. Fried, Joel & Howitt, Peter, 1980. "Credit Rationing and Implicit Contract Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(3), pages 471-487, August.
    5. Ahern, Kenneth R., 2009. "Sample selection and event study estimation," Journal of Empirical Finance, Elsevier, vol. 16(3), pages 466-482, June.
    6. Baltensperger, Ernst, 1978. "Credit Rationing: Issues and Questions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(2), pages 170-183, May.
    7. Boot, Arnoud W A & Thakor, Anjan V & Udell, Gregory F, 1991. "Secured Lending and Default Risk: Equilibrium Analysis, Policy Implications and Empirical Results," Economic Journal, Royal Economic Society, vol. 101(406), pages 458-472, May.
    8. Brandt, Loren & Li, Hongbin, 2003. "Bank discrimination in transition economies: ideology, information, or incentives?," Journal of Comparative Economics, Elsevier, vol. 31(3), pages 387-413, September.
    9. Yu, Chin-Hsien & Wu, Xiuqin & Zhang, Dayong & Chen, Shi & Zhao, Jinsong, 2021. "Demand for green finance: Resolving financing constraints on green innovation in China," Energy Policy, Elsevier, vol. 153(C).
    10. Allen, Franklin & Carletti, Elena & Goldstein, Itay & Leonello, Agnese, 2018. "Government guarantees and financial stability," Journal of Economic Theory, Elsevier, vol. 177(C), pages 518-557.
    11. Wenli Li, 1998. "Government loan, guarantee, and grant programs: an evaluation," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 25-52.
    12. Silvia Magri, 2009. "The financing of small innovative firms: the Italian case," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 18(2), pages 181-204.
    13. Eleonora Bartoloni, 2013. "Capital structure and innovation: causality and determinants," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(1), pages 111-151, February.
    14. Columba, Francesco & Gambacorta, Leonardo & Mistrulli, Paolo Emilio, 2010. "Mutual guarantee institutions and small business finance," Journal of Financial Stability, Elsevier, vol. 6(1), pages 45-54, April.
    15. Cull, Robert & Xu, Lixin Colin, 2005. "Institutions, ownership, and finance: the determinants of profit reinvestment among Chinese firms," Journal of Financial Economics, Elsevier, vol. 77(1), pages 117-146, July.
    16. Jin, Xuejun & Ke, Yuanyuan & Chen, Xiaohui, 2022. "Credit pricing for financing of small and micro enterprises under government credit enhancement: Leverage effect or credit constraint effect," Journal of Business Research, Elsevier, vol. 138(C), pages 185-192.
    17. Harhoff, Dietmar & Korting, Timm, 1998. "Lending relationships in Germany - Empirical evidence from survey data," Journal of Banking & Finance, Elsevier, vol. 22(10-11), pages 1317-1353, October.
    18. Basil Al-Najjar & Khaled Hussainey, 2011. "Revisiting the capital-structure puzzle: UK evidence," Journal of Risk Finance, Emerald Group Publishing, vol. 12(4), pages 329-338, August.
    19. Yuriy Gorodnichenko & Monika Schnitzer, 2013. "Financial Constraints And Innovation: Why Poor Countries Don'T Catch Up," Journal of the European Economic Association, European Economic Association, vol. 11(5), pages 1115-1152, October.
    20. Battiston, Stefano & Delli Gatti, Domenico & Gallegati, Mauro & Greenwald, Bruce & Stiglitz, Joseph E., 2012. "Liaisons dangereuses: Increasing connectivity, risk sharing, and systemic risk," Journal of Economic Dynamics and Control, Elsevier, vol. 36(8), pages 1121-1141.
    21. Michael Song & Cornelia Droge & Sangphet Hanvanich & Roger Calantone, 2005. "Marketing and technology resource complementarity: an analysis of their interaction effect in two environmental contexts," Strategic Management Journal, Wiley Blackwell, vol. 26(3), pages 259-276, March.
    22. Armen A. Alchian, 1950. "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy, University of Chicago Press, vol. 58(3), pages 211-211.
    23. Auerbach, Alan J., 1984. "Taxes, firm financial policy and the cost of capital: An empirical analysis," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 27-57.
    24. DeYoung, Robert & Jang, Karen Y., 2016. "Do banks actively manage their liquidity?," Journal of Banking & Finance, Elsevier, vol. 66(C), pages 143-161.
    25. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    26. Myers, Stewart C, 1984. "The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-592, July.
    27. Filippetti, Andrea & Archibugi, Daniele, 2011. "Innovation in times of crisis: National Systems of Innovation, structure, and demand," Research Policy, Elsevier, vol. 40(2), pages 179-192, March.
    28. Agenor, Pierre-Richard & Aizenman, Joshua & Hoffmaister, Alexander W., 2004. "The credit crunch in East Asia: what can bank excess liquid assets tell us?," Journal of International Money and Finance, Elsevier, vol. 23(1), pages 27-49, February.
    29. Marc Cowling & Paul Robson & Ian Stone & Gordon Allinson, 2018. "Loan guarantee schemes in the UK: the natural experiment of the enterprise finance guarantee and the 5 year rule," Applied Economics, Taylor & Francis Journals, vol. 50(20), pages 2210-2218, April.
    30. Zia, Bilal H., 2008. "Export incentives, financial constraints, and the (mis)allocation of credit: Micro-level evidence from subsidized export loans," Journal of Financial Economics, Elsevier, vol. 87(2), pages 498-527, February.
    31. Dorothea Schafer & Axel Werwatz & Volker Zimmermann, 2004. "The Determinants of Debt and (Private) Equity Financing: The Case of Young, Innovative SMEs from Germany," Industry and Innovation, Taylor & Francis Journals, vol. 11(3), pages 225-248.
    32. Honohan, Patrick, 2010. "Partial credit guarantees: Principles and practice," Journal of Financial Stability, Elsevier, vol. 6(1), pages 1-9, April.
    33. Lei Cheng & Zhen Lei, 2015. "Does the expansion of Chinese state-owned enterprises affect the innovative behavior of private enterprises?," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 22(1), pages 24-54, March.
    34. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
    35. Love, Inessa & Zicchino, Lea, 2006. "Financial development and dynamic investment behavior: Evidence from panel VAR," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 190-210, May.
    36. Michelle Marcus & Pedro H. C. Sant’Anna, 2021. "The Role of Parallel Trends in Event Study Settings: An Application to Environmental Economics," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 8(2), pages 235-275.
    37. Maria CARACOTA DIMITRIU & Sorina Cristina OACA, 2010. "Funds transfer pricing in banking," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 13(1), pages 119-127, June.
    38. Alberto Franco Pozzolo, 2004. "The role of guarantees in bank lending," Temi di discussione (Economic working papers) 528, Bank of Italy, Economic Research and International Relations Area.
    39. Odongo Kodongo & Thabang Mokoaleli-Mokoteli & Leonard N. Maina, 2015. "Capital Structure, Profitability And Firm Value: Panel Evidence Of Listed Firms In Kenya," The African Finance Journal, Africagrowth Institute, vol. 17(1), pages 1-20.
    40. Kieschnick, Robert & Moussawi, Rabih, 2018. "Firm age, corporate governance, and capital structure choices," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 597-614.
    41. Jarrow, Robert A, 1978. "The Relationship between Yield, Risk and Return of Corporate Bonds," Journal of Finance, American Finance Association, vol. 33(4), pages 1235-1240, September.
    42. Markowitz, Harry M, 1991. "Foundations of Portfolio Theory," Journal of Finance, American Finance Association, vol. 46(2), pages 469-477, June.
    43. Manigart, Sophie & Struyf, Carol, 1997. "Financing High Technology Startups in Belgium: An Explorative Study," Small Business Economics, Springer, vol. 9(2), pages 125-135, April.
    44. Basil Al‐Najjar & Khaled Hussainey, 2011. "Revisiting the capital‐structure puzzle: UK evidence," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 12(4), pages 329-338, August.
    45. Thomas Dalziel & Richard J. Gentry & Michael Bowerman, 2011. "An Integrated Agency–Resource Dependence View of the Influence of Directors' Human and Relational Capital on Firms' R&D Spending," Journal of Management Studies, Wiley Blackwell, vol. 48, pages 1217-1242, September.
    46. Asim Ijaz Khwaja & Atif Mian, 2005. "Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(4), pages 1371-1411.
    47. Alexander Kurshev & Ilya A. Strebulaev, 2015. "Firm Size and Capital Structure," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 5(03), pages 1-46, September.
    48. H J Jeon & S Y Sohn, 2008. "The risk management for technology credit guarantee fund," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(12), pages 1624-1632, December.
    49. James R. Brown & Steven M. Fazzari & Bruce C. Petersen, 2009. "Financing Innovation and Growth: Cash Flow, External Equity, and the 1990s R&D Boom," Journal of Finance, American Finance Association, vol. 64(1), pages 151-185, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. George X. Yuan & Hua He & Haiyang Liu & Yunpeng Zhou & Wen Chen, 2025. "The framework of Hammer (CAFÉ) credit rating for capital markets in China with international credit rating standards," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(4), pages 1993-2013, June.
    2. Ahsan Akbar & Muhammad Usman & Teng Lin, 2024. "Institutional dynamics and corporate innovation: A pathway to sustainable development," Sustainable Development, John Wiley & Sons, Ltd., vol. 32(3), pages 2474-2488, June.
    3. Li, Zengfu & Yu, Zhijun & Yang, Zhihao & Ding, Zijia, 2025. "Specialization in Bank Lending and short-term debt for long-term use: Evidence from China," Finance Research Letters, Elsevier, vol. 75(C).
    4. Yunqing Tao & Yongwei Ye & Wanyue Hou, 2025. "Corruption‐induced bank nonperforming loans," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(4), pages 2014-2028, June.
    5. Wei Zhu & Wei‐jian Li & Lei Wang, 2024. "The impact of environmental, social, and governance ratings on corporate innovation: From the perspective of informal institutions," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(4), pages 2000-2022, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Elisa Ughetto & Andrea Vezzulli, 2011. "What role can mutual guarantee consortia play for financing innovation? A firm-level study for Italy," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 3(4), pages 294-319.
    2. Mohamed Oudgou & Abdeslam Boudhar, 2023. "The bank–SME relationship and rationing risk reduction: an empirical study on survey data," SN Business & Economics, Springer, vol. 3(8), pages 1-39, August.
    3. Silvia Magri, 2014. "Does issuing equity help R&D activity? Evidence from unlisted Italian high-tech manufacturing firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 23(8), pages 825-854, November.
    4. Bruder, Jana & Neuberger, Doris & Räthke-Döppner, Solvig, 2008. "Financial constraints of ethnic entrepreneurship: Evidence from Germany," Thuenen-Series of Applied Economic Theory 84, University of Rostock, Institute of Economics.
    5. Doris Neuberger & Solvig Räthke-Döppner, 2015. "The role of demographics in small business loan pricing," Small Business Economics, Springer, vol. 44(2), pages 411-424, February.
    6. Marek Giebel & Kornelius Kraft, 2024. "R&D investments under financing constraints," Industry and Innovation, Taylor & Francis Journals, vol. 31(9), pages 1141-1168, October.
    7. Silvia Magri, 2014. "Does issuing equities help R&D activity? Evidence from unlisted Italian high-tech manufacturing firms," Temi di discussione (Economic working papers) 978, Bank of Italy, Economic Research and International Relations Area.
    8. Song, Pengcheng & Zhang, Hai & Zhao, Qin, 2021. "Innovative Credit Guarantee Schemes with equity-for-guarantee swaps," International Review of Financial Analysis, Elsevier, vol. 77(C).
    9. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August.
    10. Annie bellier & Wafa Sayeh & Stéphanie Serve, 2012. "What lies behind credit rationing? A survey of the literature," THEMA Working Papers 2012-39, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    11. Rafal M. Wojakowski & M. Shahid Ebrahim & Aziz Jaafar & Murizah Osman Salleh, 2019. "Can Loan Valuation Adjustment (LVA) approach immunize collateralized debt from defaults?," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 28(2), pages 141-158, May.
    12. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    13. Lewe, Stefan, 2003. "Wachstumseffiziente Unternehmensbesteuerung," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 20042, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    14. Arito Ono & Iichiro Uesugi, 2009. "Role of Collateral and Personal Guarantees in Relationship Lending: Evidence from Japan's SME Loan Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(5), pages 935-960, August.
    15. Yehui Tong & Zelia Serrasqueiro, 2020. "The Influential Factors on Capital Structure: A Study on Portuguese High Technology and Medium-High Technology Small and Medium-Sized Enterprises," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(4), pages 23-35, July.
    16. Bussolo, Maurizio & de Nicola, Francesca & Panizza, Ugo & Varghese, Richard, 2022. "Politically connected firms and privileged access to credit: Evidence from Central and Eastern Europe," European Journal of Political Economy, Elsevier, vol. 71(C).
    17. Veljko Fotak, 2016. "A Spark from the Public Sector: Co-lending by Government-owned and Private-sector Lenders," BAFFI CAREFIN Working Papers 1624, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    18. Chala, Alemu Tulu & Forssbaeck, Jens, 2018. "Does Collateral Reduce Loan-Size Credit Rationing? Survey Evidence," Working Papers 2018:36, Lund University, Department of Economics.
    19. Mario Tirelli & Luca Spinesi, 2021. "R&D financing and growth," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 30(1), pages 24-47, January.
    20. Chen, Shimin & Sun, Zheng & Tang, Song & Wu, Donghui, 2011. "Government intervention and investment efficiency: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 259-271, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:44:y:2023:i:5:p:2615-2625. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.