A Empirical Stutdy On The Effect Of Innovation On Financial Structure

Financial structure has been a hot topic since Modigliani and Miller created MM financial structure theory in 1958. However, for a long period of time, studies on financial structure have followed the traditional research methods in financial economics according to the financial mode, without combination with corporate strategy, cannot give full arguments to enterprise about how to obtain competitiveness out of financial structure decisions, and causes fragmentation between disciplines.In twenty eighties, scholars started to pay attention to the integration of industrial organization and financial structure. From the view of industrial organization, the studies on financial structure according to mode of industrial balance is on the premise of same enterprise nature, researches the influence of external factors such as industrial characteristics, market concentration and the intensity of enterprise competition on financial structure form the view of external market characteristics. However, there are few studies focuses on the influences of endogenous factors such as innovative behaviour, which affects the long-term competitiveness of an enterprise, on the financial structure.The paper thinks that the discussion of influencing factor on enterprise financial structure according to the mode of innovative and strategical management can close the gap when we adopt the financial mode and mode of industrial balance, and improve the understanding on financial structure. The paper integrates the innovation into the theoretical framework of influencing factor on financial structure from the perspective of innovative process. The financial structure is regarded as the managers’ choice when they consider innovative resource, innovative ability and the degree of product differentiation. The theoretical model about connection of investment of innovative resource, innovative ability, the degree of product differentiation and financial structure is established under the framework, on the basis of which the companies listed on GEM are collected as samples to demonstrate the influence of enterprise innovation on decision of financial structure.Empirical results indicate as follows, First of all, in order to keep a continuous, stable and long-term investment of innovative resources, it is necessary to adopt a slack financial strategy, rely more on the internal retained earnings and select lower debt financing proportion.Secondly, an enterprise with strong innovative ability can decrease the uncertainty of R&D activities, increase the success of innovation and reduce the risk of technical innovation. The reduction of the risk of technical innovation allows the enterprise to undertake more financial risks and consequently strengthen the ability of the enterprise to use more debt financing.Thirdly, companies with differentiated products select low debt financing proportion in order to deliver to stakeholders signal from continuing operations.Finally, during innovation, the characteristics of the management team influence the correlation between innovative investment and financial structure. The management team with short term and high qualification prefers to adopt more aggressive financial leverage for financing to meet the need of capital for innovative investment of the enterprise.