An Empirical Research On The Impact Of Bank Competition On Corporate Innovation

At present,with the gradual improvement of China’s financial market structure,the banking industry has shifted from an oligopoly market to a market structure where competition continues to increase.With the gradual transformation of China’s economic development model from Made in China to Innovated in China,more and more scholars have begun to pay attention to whether China’s banking-led financial system can affect the level of innovation at the micro-firm level.As the main source of external financing for Chinese firms,bank loans play an important role in enhancing the innovation level of.This paper studies the impact of banking market competition on corporate innovation from the perspective of financing constraints.Existing research has shown that in China,the increased level of bank competition can enhance the innovation of firms.Based on the existing researches,this paper further explores the possible influencing mechanism,as well as the impacts that different corporate heterogeneity characteristics bring.On the basis of previous researches,this paper confirms the promotion effect of bank competition on corporate innovation,and then analyzes the possible mechanism during the process,and makes an in-depth analysis from the perspective of financing constraints and corporate life cycle.This paper selects 1608 industrial listed firms in China’s A-share market from 2007 to 2017 as research samples,and conducts empirical tests on the theoretical hypotheses by establishing appropriate models.The empirical results of this paper show that the increased level of bank competition will significantly improve corporate innovation.Through in-depth exploration of the possible impact mechanism during the process,it is found that the increased level of bank competition can improve corporate innovation by reducing the debt financing cost and increasing short-term borrowing.This paper then further considers the possible impact of the heterogeneous characteristics of the firm.First of all,from the classified regression results of the intensity of corporate financial constraints,we find that firms with strong financial constraints are more significantly affected by bank competition,which proves that financial constraints are a major factor restricting the improvement of corporate innovation levels.Then,from the classified regression results of different stages of corporate life cycle,we find that bank competition all has a positive effect on the innovation level of firm in different stages of corporate life cycle,further,the promotion effect is the largest in decline stage,followed by maturity stage and growth stage the least.At the last part of the paper,some policy recommendations are put forward based on the empirical results obtained: the government should encourage banks to provide loan support to small and medium-sized enterprises that are strongly constrained by financing,and appropriately grant certain preferential policies when formulating tax policies;firms themselves should also allocate funds reasonably and actively invested in innovative activities.