Does Bank Credit Affect Innovation? International Evidence from Collateral Law Reform

42 Pages Posted: 27 May 2020 Last revised: 1 Oct 2020

See all articles by Wenzhi Ding

Wenzhi Ding

The University of Hong Kong - HKU Business School

Lai Wei

Lingnan University - Department of Finance and Insurance

Wensi Xie

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Date Written: May 26, 2020

Abstract

Exploiting legal reforms that facilitate the use of movable assets as collateral in secured debt transactions, we examine the impact of access to bank credit on corporate innovation. We create a firm-level panel data set on patenting activities for 45,325 firms across 30 European countries from 1992 through 2015. We find that following the legal reforms, firms operating in sectors with more movable assets conduct more innovation activities and with higher quality, as measured by the number of patents, citations, and the number of impactful patents. The effects are stronger among firms that are more financially constrained, and belong to innovative-intensive industries, suggesting that the legal reforms spur innovation by improving access to credit.

Keywords: Corporate Innovation; Collateral Laws; Patents; Access to Credit

JEL Classification: G30; K22; O30; O16

Suggested Citation

Ding, Wenzhi and Wei, Lai and Xie, Wensi, Does Bank Credit Affect Innovation? International Evidence from Collateral Law Reform (May 26, 2020). Available at SSRN: https://ssrn.com/abstract=3609352 or http://dx.doi.org/10.2139/ssrn.3609352

Wenzhi Ding

The University of Hong Kong - HKU Business School ( email )

Pokfulam Road
Hong Kong SAR
China

Lai Wei

Lingnan University - Department of Finance and Insurance ( email )

8 Castle Peak Road
Lingnan University
Hong Kong, New Territories
China

Wensi Xie (Contact Author)

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
Hong Kong

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