Bank credit and corporate innovation investment: The role of government risk sharing

Abstract

This paper builds a difference-in-difference model (DID) to study the impact of government risk sharing policies on corporate innovation investment. High-tech firms are used as the experimental group to test the effect of policy shocks. It is shown that government risk sharing may ease financing constrains, which will increase corporate innovation investment. The results suggest that the effect of government risk-sharing policies on bank credit is short-run, while the effect on corporate innovation investment is more sustainable. In addition, the government risk-sharing ratio is inversely proportional to the loan rates and the success rate of innovation.