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Economic Analysis of Credit Constraints and Corporate R&D Manipulation

【Authors】
CHENG Ling, WANG Shun &LIU Qing
【WorkUnit】
CHENG Ling (Shanghai University of Finance and Economics, 200433)WANG Shun (Jinan University, 510632)LIU Qing (Hefei University of Technology, 230009)
【Abstract】

In China, where credit constraints are universal, why has corporate R&D participation and average R&D intensity shown a numerical anomaly of increasing rather than decreasing? To answer this question, this paper develops an extended heterogeneous corporate innovation model where corporate R&D investment has to be financed by external capital, and uses 2008-2015 data about companies listed on the Chinese A-share market. We find that credit constraints do not reduce corporate R&D participation, but instead encourage firms to engage in R&D manipulation. This shows that the root of the above paradox lies in the fact that in order to obtain corresponding resources, some firms subjected to credit constraints strategically increase their R&D intensity to meet the relevant standards defined by the Administrative Measures for the Identification of High-tech Enterprises. Furthermore, this paper finds that the distorted incentive effect of credit constraints on corporate R&D manipulation would weaken with the improvement of corporate productivity and regional financial development; more importantly, R&D manipulation has not improved but reduced the corporate productivity and profit. This paper holds that institutional accommodation is an economic explanation for the abnormal coexistence of relatively high credit constraints and R&D intensity. Therefore, only by fully improving criteria for identifying hightech enterprises and further deepening the reform of the financial system, can we really contribute to implementing the national innovation-driven development strategy and achieve high quality development.

JEL:G18, O17, O32

【KeyWords】
Credit Constraints, R&D Intensity, R&D Manipulation, Institutional Accommodation