Asset Pledgeability and Firm Innovation

59 Pages Posted: 3 Sep 2017 Last revised: 11 Apr 2021

See all articles by Huafeng (Jason) Chen

Huafeng (Jason) Chen

Fudan University - Fanhai International School of Finance (FISF)

Xiaofei Pan

University of Wollongong

Meijun Qian

Australian National University (ANU) - College of Business and Economics

Yiping Wu

Shanghai University of Finance and Economics

Qing Xia

University of Nottingham, Ningbo

Date Written: April 11, 2021

Abstract

We examine the effect of debt financing capacity on firm innovation by employing a shock that increases firms’ asset pledgeability. We find that firms increase their innovation activities after the shock, and the increase is greater in regions with more effective enforcement and in firms with more tangible assets, even after using a matching firm analysis. We also find that firms with more tangible assets are associated with a higher level of bank loans after legal enactments. After using three instrumental variables, we find that the increase in innovation is stronger in firms with higher market tangibility.

Keywords: Asset pledgeability, Financing Capacity, Collateral, Patent

JEL Classification: G31, G33

Suggested Citation

Chen, Huafeng (Jason) and Pan, Xiaofei and Qian, Meijun and Wu, Yiping and Xia, Qing, Asset Pledgeability and Firm Innovation (April 11, 2021). Available at SSRN: https://ssrn.com/abstract=3031323 or http://dx.doi.org/10.2139/ssrn.3031323

Huafeng (Jason) Chen (Contact Author)

Fudan University - Fanhai International School of Finance (FISF) ( email )

220 Handan Road
Shanghai, 200433
China

Xiaofei Pan

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Meijun Qian

Australian National University (ANU) - College of Business and Economics ( email )

Canberra
Australia

Yiping Wu

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Qing Xia

University of Nottingham, Ningbo ( email )

199 Taikang East Road
Ningbo, Zhejiang 315100
China

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