2012
DOI: 10.2139/ssrn.1745682
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Abstract: We examine how financial market development affects technological innovation. Using a large data set that includes 32 developed and emerging countries and a fixed effects identification strategy, we identify economic mechanisms through which the development of equity markets and credit markets affects technological innovation. We show that industries that are more dependent on external finance and that are more high-tech intensive exhibit a disproportionally higher innovation level in countries with better dev… Show more

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Cited by 223 publications
(375 citation statements)
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“…The results in Table 5, taken together, show that the negative association between stock market development and the cost of equity is weaker for firms with high growth opportunities and intensive innovation, which is consistent with our expectations. However, the above finding is in contrast to evidence in Brown et al (2013) and Hsu et al (2014) where stock market financing generally leads to substantially higher long-run R&D investment. This inconsistency points to a weakness of the Chinese stock market of failing to provide sufficient equity financing to firms with high growth potential and innovation intensity.…”
Section: The Relation Between Banking Development and The Cost Of Equcontrasting
confidence: 97%
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“…The results in Table 5, taken together, show that the negative association between stock market development and the cost of equity is weaker for firms with high growth opportunities and intensive innovation, which is consistent with our expectations. However, the above finding is in contrast to evidence in Brown et al (2013) and Hsu et al (2014) where stock market financing generally leads to substantially higher long-run R&D investment. This inconsistency points to a weakness of the Chinese stock market of failing to provide sufficient equity financing to firms with high growth potential and innovation intensity.…”
Section: The Relation Between Banking Development and The Cost Of Equcontrasting
confidence: 97%
“…Second, banking development is weakly and negatively associated with the cost of equity, consistent with the notion that the lack of banking competition and state-ownership of large banks decreases banking efficiency. The association diminishes in firms with higher growth or more intensive innovation, consistent with findings in prior cross-country studies (Brown et al, 2013;Hsu et al, 2014) that banking development generally does not support firm growth and innovation. Third, stock market and banking development have virtually no impact on the cost of equity for SOEs, while they have a significant impact on reducing the cost of equity for non-SOEs.…”
Section: Introductionsupporting
confidence: 86%
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“…Corporate innovation has been found to be influenced by venture capital (Kortum and Lerner 2000;Tian and Wang 2014;Chemmanur et al 2014), creditor rights (Acharya and Subramanian 2009), CEO overconfidence (Hirshleifer et al 2012), analyst coverage (He and Tian 2013), ownership structure (Aghion et al 2013;Ferreira et al 2014), conglomerate form (Seru 2014), stock liquidity (Fang et al 2014), and financial market development (Hsu et al 2014). Our paper focuses on the market pricing of corporate innovation, which extends the line of literature examining corporate innovation based on total R&D expenditure and patents (Eberhart et al 2004;Hsu 2009;Lin 2012;Hirshleifer et al 2013;He and Tian 2013).…”
Section: Review Of Related Researchmentioning
confidence: 99%