Evaluation Research On The Promotion Effect Of Banking Competition On Enterprise Innovation

Technical innovation is the fundamental way to cultivate the core competitiveness of enterprises.However,the intensity of R&D investment of Chinese enterprises is still relatively low compared with traditional technological powers such as the United States and Japan.This is partly because,for a long time,China’s banking industry has been the dominant force in the financial system.The market monopoly power of the five major banks is relatively high,and the market competition in the banking industry is not sufficient.Enterprises face serious financing constraints when carrying out R&D and innovation activities.But in recent years,with the deepening of financial market reforms,the degree of competition in China’s banking industry has increased significantly.Has this effectively promoted corporate innovation?What is the mechanism?This article intends to study this problem.In terms of theory,this paper analyzes the impact of banking industry competition on corporate innovation and proposes the hypothesis that banking industry competition can promote corporate innovation.we believe that easing financing constraints and improving resource allocation are the corresponding micro mechanisms.When the degree of competition in the banking industry increases,the bank will reduce the expected rate of return and the amount of principal preservation loans,so that the credit supply will be improved and the cost of credit will be reduced.Thereby it will alleviate the financing constraints faced by corporate R&D activities.In addition,banks will also pay attention to the screening and evaluation of loan projects and it can improve resource allocation,and make loans flow more to good R&D projects and innovative enterprises.In the evaluation method,this paper uses 2007-2017 China A-share listed companies as data samples to establish relevant models and empirically explores the impact of China’s banking market competition on corporate innovation activities and the corresponding micro-mechanism.The research results show that Banking competition will promote enterprises’ R&D investment and innovation output,and also have a positive impact on the efficiency of the enterprise’s innovation output.Further,the article finds that increased competition in the banking industry will reduce the sensitivity of cash flow when companies invest in R&D.Alleviating financing constraints is a mechanism for the banking industry to promote innovative output.However,empirical results show that competition in the banking industry has not improved the bank’s resource allocation and guided the flow of funds to companies with strong innovation capabilities.Instrumental variable regression was used to correct endogenous deviations,and multiple alternative indicators were used to test the robustness.The result is still true.One possible contribution of this article is to construct a multi-level enterprise innovation measurement index and comprehensively examine the promotion effect of banking competition on enterprise innovation.Besides,this article explores the micro-mechanisms in which banking competition affects enterprise innovation,thereby supplementing the literature on banking competition and enterprise innovation.In addition,the research conclusions of this paper have certain reference and reference for the China’s future marketization reform and optimization of financial system.