Abstract

http://ssrn.com/abstract=1745682
 
 

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Financial Development and Innovation: Cross-Country Evidence


Po-Hsuan Hsu


University of Hong Kong

Xuan Tian


Indiana University - Kelley School of Business - Department of Finance

Yan Xu


HKU, Faculty of Business and Economics

February 11, 2013

Journal of Financial Economics (JFE), Forthcoming

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 developed equity markets. However, the development of credit markets appears to discourage innovation in industries with these characteristics. Our paper provides new insights into the real effects of financial market development on the economy.

Number of Pages in PDF File: 46

Keywords: financial development; innovation; external finance dependence; high-tech intensiveness

JEL Classification: G15, O30, R11

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Date posted: January 23, 2011 ; Last revised: June 15, 2014

Suggested Citation

Hsu, Po-Hsuan and Tian, Xuan and Xu, Yan, Financial Development and Innovation: Cross-Country Evidence (February 11, 2013). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1745682 or http://dx.doi.org/10.2139/ssrn.1745682

Contact Information

Po-Hsuan Hsu
University of Hong Kong ( email )
Pokfulam Road
Hong Kong
China
Xuan Tian
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. Tenth Street
Bloomington, IN 47405
United States
812-8553420 (Phone)
824-8555875 (Fax)
HOME PAGE: http://kelley.iu.edu/tianx

Yan Xu (Contact Author)
HKU, Faculty of Business and Economics ( email )
Pok Fu Lam Road
Hong Kong
Hong Kong
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