Empirical Analysis On Financial Constrains,Cash Holdings And R&D Smoothing

In new normal economy,China has carried out the sustained strategy of science and technology innovating.Through R&D investment,it can effectively improve the independent innovation capability of enterprises,transform the economic development mode,and enhance the competitiveness of the national economy.Therefore,how to ensure the smooth and continuous investment in R&D is particularly important.This paper uses a panel of Chinese listed firms over the period 2008-2017 to analyze the relationship between financial constraints,cash holdings and R&D investment.We find that the cash flow sensitivity of R&D investment is more positive for financially constrained firms,and cash holdings play an important role on smoothing innovation activities.According to asset sizes,leverages and SA index raised by Hadlock& Pierce(2009),we grouped the whole sample into Group FC and Group NFC,and find that the more serious financing constraints the enterprises suffer,the more important role the cash holdings play.Our study shows that though China's capital market is undeveloped,Chinese firms can keep innovation going stably by internal fund and cash holdings management.