Narrative R&D disclosure and bank loans: Evidence from China

Abstract

By taking advantage of machine learning and textual analysis method to construct narrative R&D disclosures, we investigate the impact of narrative R&D disclosures of China's listed firms on their access to bank financing with the two-way fixed effects model. We found that narrative R&D disclosures lead to an increase in bank financing of listed firms. This conclusion still holds after a series of robustness and endogeneity tests. Additionally, it is found that the enhancement of incremental information and banks' superiorities in processing complicated public information are the mechanisms. Finally, we further find that the positive impact of narrative R&D disclosures on bank loans is mainly manifested in the sample of firms operating in highly competitive industries, non-state-owned in nature and R&D-intensive.