What is the relationship between financial development and enterprise R D investment?

Research on the Relationship between Financial Development, Financing Constraints and Enterprise R&D InvestmentUnder the assumption of MM theory, the cost of enterprises to obtain funds from the outside will be equal to the cost of enterprises to obtain funds from themselves, that is, the external financing of enterprises will not face high cost constraints.

Most scholars have shown that financial development promotes firm innovation by alleviating the financing constraints faced by firms. The financial market is an important external financing market for the survival and development of various economic entities, and the improvement of the level of financial development can allocate resources faster and more efficiently, evaluate innovative projects more accurately, reduce the problem of information asymmetry, and better manage risksImprove the enthusiasm of investors, better supervise and manage people, reduce moral hazard, and ultimately ease the financing constraints of enterprises.

The financial system has the functions of transferring and allocating resources, managing risks, reserving resources and managing property rights. Giving financial assistance to enterprises is an important function of the financial system, and scientific and technological innovation is inseparable from the support and help of finance.

Financial development means the improvement of the entire banking industry and capital market, the ability of the financial market to mobilize savings funds has become stronger, the efficiency of the financial market in allocating resources has become higher, and the market has become more standardizedInsurance companies can not only provide certain guarantees for our personal safety and property safety, but also provide certain support for corporate financing.

The improvement of the level of financial development will create a better financial ecological environment, improve the information asymmetry between the banking sector and borrowers, and reduce credit costs and credit risks. The improvement of the level of financial development can also reduce the transaction and information costs generated by the financial system in pooling idle funds in society, and improve the conversion rate of savings and investment.

The measure of financial development was first proposed by Goldsmith to use the total amount of financial assets measured by GDP. However, in the empirical study, the total amount of financial assets in each region cannot be obtained, so some scholars use the market-oriented index of Fan Gang and Wang Xiaolu to measure financial development.

However, the market-based index is updated slowly, and it is not possible to provide the market-based index of each province in the most recent year. China has long been a country with a "bank-led financial structure", so the regional GDP (the total amount of loans or deposits and loans of provincial financial institutions) has been selected by many scholars as a measure variable of the financial development level of each province.

Since the reform and opening up, China's banking industry and capital market have made great progress, although there is still a certain gap compared with other developed countries. A country's financial development is not only reflected in the banking industry, but also in the capital market. There are also many scholars who consider financial intermediation and financial markets to measure financial developmentFinancial intermediaries mainly refer to banking financial institutions, and financial markets mainly refer to the first market.

For financial intermediation and financial markets, most scholars also divide them into financial scale and financial structure, and a few scholars divide them into financial efficiency. Most scholars use the ratio of deposits and loans of financial institutions or loan balances to GDP to measure the size of the banking industry, and the market size is measured by the ratio of market value or market turnover to GDP.

For the financial structure, some scholars choose the ratio of loans to non-state-owned enterprises, the competition in the financial industry, the structure of credit terms, the proportion of assets of small and medium-sized banks, and the ratio of total loans of financial institutions to the market value as measurement indicators. Financial efficiency mainly refers to the conversion rate of deposits and loans. In addition, some scholars include financial access and financial stability in the indicators of financial development.

From the existing research, it can be seen that there are many factors affecting the R&D investment of enterprises, and financial development is one of the important external factors affecting the R&D investment of enterprises. At present, most scholars are based on the neoclassical growth model, endogenous growth model and Schumpeterian growth model**The relationship between financial development and economic growth, and a few scholars directly study the direct relationship between financial development and enterprise R&D investment.

A country's economic growth is inseparable from the support of scientific and technological innovation of enterprises, and the important premise of scientific and technological innovation is a huge amount of research and development funds. The company's own conditions, such as its size, establishment years, financial situation, and the characteristics of R&D activities, all make enterprises face high external financing costsHowever, the company's own funds alone cannot meet the long-term demand for R&D and innovation funds, which ultimately affects the R&D activities of enterprises, the innovation ability of enterprises, and China's scientific and technological innovation.

From the existing research, it can be seen that the financing problems faced by enterprises will be alleviated to a certain extent with the improvement of the level of financial development. Therefore, on the basis of previous scholars' research, this paper examines whether further financial development has a positive impact on corporate R&D investment.

For the measurement of financial development, some scholars choose the financial correlation ratio as a surrogate indicator, and some scholars consider the measurement of financial development from the perspective of the banking sector and the marketBased on Goldsmith's (1969) theory of financial structure, this paper uses principal component analysis to construct financial development indicators from two aspects: financial scale and financial structure.

Among them, the financial scale includes the scale of the banking industry, the scale of the market, the size of the bond market, the scale of the insurance market, and the financial structure includes the proportion of assets of small and medium-sized banks and the ratio of the loan amount of banking financial institutions to the market value. Financial development not only reflects the increase in the scale of deposits and loans in the banking industry, but also the increase in the total market value, as well as the increase in the transaction volume of the bond market and the increase in the premium income of insurance companies.

The structural changes of medium and large banks, small and medium-sized banks in the banking industry, and the changes in the structure of China's overall financial market will reflect the current situation of China's financial development. The growth of the M2 indicator and the improvement of the financial structure are both manifestations of financial development. Therefore, this paper will refer to the above-mentioned scholars, consider the financial scale and financial structure from various aspects, and use the principal component analysis method to construct a comprehensive index as the first variable of financial development.

In 1970, the theory of information asymmetry was first proposed by George. Akeroff, Michael. Spence et al. have proposed that this theory holds that there are differences in the quantity and quality of information possessed by both parties in market transactions. In general, the party with more information has better quality information, while the other party is relatively at a disadvantage, which can lead to adverse selection and moral hazard.

Before the transaction takes place, the party with the information advantage may realize its own interest needs at the expense of the other party's interests, i.e., adverse selection. Moral hazard refers to the fact that after a transaction occurs, one party will use its own advantages to obtain information to meet its own interests, and in the process, it may harm the interests of the other party. In enterprise R&D activities, enterprise managers are the party with information advantage, while market investors are at the side with relatively weak information.

Enterprise managers understand their overall financial situation, R&D innovation capabilities and the overall situation of R&D projects, while the financial reports and R&D projects disclosed by enterprises are important for market investors to obtain information, and market investors mainly judge the company's operating ability, debt repayment ability, and evaluate the company's innovation ability and R&D project risk.

R&D projects are generally trade secrets of enterprises, which are important resources for the long-term development and maintenance of core competitiveness of enterprises. Plus,China's information disclosure system is not perfect, and the relevant regulatory measures need to be improved, even if enterprises disclose all the information of R&D projects, it is difficult to ensure the quality of information.

Market investors in R&D activities need to incur additional costs to obtain more and more effective information, which discourages investors. In addition, the problem of information asymmetry also makes market investors often demand higher yields to compensate for the risk of losses they may bear, which in turn increases the cost of raising funds from the external financial market.

When the internal funds of the enterprise are not enough to support the R&D activities of the enterprise, the enterprise managers will reduce the capital investment in the R&D project, or even suspend the development of some R&D projects, or give up some R&D project investment opportunities, that is, the high additional financing costs faced by enterprises will restrict their R&D investment.

In 1976, Jensen and Mecklin put forward the ** theory, which believes that the supply and demand sides of enterprise resources are maintained in the form of contracts to form the entrusting party and the first party. Under normal circumstances, regardless of the amount of information or the quality of the information, the first party has more advantages than the entrusting party.

*In the case of satisfying its own interests, it may harm the interests of the entrusting party. On the one hand, the problem of entrustment exists between enterprise managers and shareholders. The R&D activities of enterprises have high costs, long cycles, high risks, and long capital return cyclesIt is difficult for enterprise managers to obtain matching benefits during the R&D project period, which may reduce the supervision of R&D projects and increase the risk of loss of R&D activities.

In this case, equity investors will be relatively cautious in investing in the company's R&D activities, which may reduce the investment amount or increase the return on capital. On the other hand, there is also the issue of entrustment between shareholders and creditors. Relative to creditors, shareholders enjoy all the benefits of the results of the R&D project, while creditors can only demand the repayment of principal and interest from the enterprise.

Shareholders are more willing to engage in high-risk, high-yield R&D activities than creditors, which may harm the interests of creditors and cannot guarantee the full repayment of the principal and interest of creditors. In this case, the creditor will also ask for a higher demand for the use of funds or a higher interest rate.

The above two kinds of entrustment problems will make enterprises pay higher costs in order to obtain funds. In 1969, Goldsmith put forward the theory of financial structure, which believes that the sum of financial instruments and financial institutions is the financial structure, and the essence of studying financial development is to study the changes in financial structure. A country's financial development will be reflected in the emergence of financial instruments, such as **, bonds, **, etc., and the increase in types.

The increase in the number of urban commercial banks, urban banks and rural commercial banks in the banking industry, the expansion of the scale of assets, and the emergence and increase in the number of ** companies and ** companies also reflect the development of finance. Changes in the structure of the banking industry, changes in the capital market, and eventually lead to changes in the entire financial structure.

The increase in the number of financial institutions and the increase in the scale of assets will increase the financing channels and financing scale of enterprises to a certain extent, and the increase in financial instruments will also enrich the financing methods of enterprises to a certain extent, thereby reducing the difficulty of raising funds from the financial market and reducing the cost of external financing of enterprises.

Financial development is not only the increase in the number and scale of financial institutions, the enrichment of financial instruments, the optimization of financial structure, and most importantly, the realization of a series of financial functions. 1995, Robert. Merton and Zvi. Bodie proposed the concept of financial functionThe theory focuses more on the interrelationship between financial markets and financial intermediaries, pointing out that the financial system has the ability to aggregate, transfer and distribute resources, can also adopt diversified methods to manage risk, and can also provide accurate market information.

With the improvement of the financial system, there are more and more financial instruments, financial products are more diversified, and investors can diversify their risks in a wider way, which can reduce market investment risks to a certain extent, which is conducive to improving the enthusiasm of investors, so that more idle funds in the society flow to high-risk, high-yield research and development activities, and promote enterprise innovation.

A complete financial market can also provide information related to corporate R&D activities to the market in a timely and accurate manner through the transmission mechanism, and provide information support for investors to make effective analysis and correct judgments.