The Financial System Reform Of "Province Governing County" And Corporate Innovations

Since 2002,the financial system reform of "Province Governing County" in China has been implemented for 20 years.With the passage of time,can this reform promote corporate innovation? To solve this problem,this paper analyzes the corporate innovation from the micro perspective.This paper collects the reform data of the financial system reform of "Province Governing County" from 2002 to 2019,takes the financial system reform of "Province Governing County" as a quasi natural experiment,and empirically tests the impact of the financial system reform of "Province Governing County" on corporate innovation by using propensity score matching model and difference-in-differences model.The study found that,on the whole,the financial system reform of "Province Governing County" has significantly increased the number of corporation patent applications,that is,the reform of financial system has a positive impact on the improvement of corporate innovation.The intermediary effect test results show that the financial system reform of "Province Governing County" alleviates the financing constraints by increasing government subsidies,so as to improve R&D investment and corporate innovation.A series of cross-sectional tests are carried out in this paper.The results show that when the higher the degree of corporate financing constraints,the ownership attribute is private corporations,the higher the degree of government intervention where the corporation is located(that is,the lower the degree of marketization),the financial system reform of "Province Governing County" plays a more significant role in improving corporate innovation.However,the slow level of economic development will restrict the promotion of the financial system reform of "Province Governing County" to corporate innovation.Further,considering that the existing literature found that the financial system reform of "Province Governing County" will lead to the strengthening of government tax collection and management,this paper found that the positive impact of the financial system reform of "Province Governing County" on corporate innovation only exists in the samples with low effective tax rate,which shows that the tax burden will reduce the corporate innovation to a certain extent.This paper studies the impact of the financial system reform of "Province Governing County" on corporate innovation,provides another perspective to study the effect of the financial system reform of "Province Governing County",investigates the adaptability of the reform that has been implemented for 20 years to the new economic normal,deepens the understanding of the reform,and enriches the research on fiscal policy and corporate behavior.