Abstract
ABSTRACT We investigate the effect of financing constraints on the R&D investment of Chinese listed firms for the period 2010–2020. The sample is divided into state-owned versus private firms, which differ substantially in R&D patterns, financial structures, and other characteristics. We find that, in both state-owned and private firms, internal cash flow significantly affects R&D investment, suggesting the presence of binding financing constraints. Both state-owned and private firms actively manage liquid assets to smooth R&D spending. Debt finance is insignificant for both state-owned and private firms. New stock issues have a significant positive effect on R&D in private firms only, not in state-owned firms. Given that the contribution of private firms to aggregate R&D is increasing, stable stock market conditions may have an important aggregate impact on R&D.
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