Credit Supply and Corporate Innovation

57 Pages Posted: 15 Mar 2012 Last revised: 2 Oct 2015

Mario Daniele Amore

Bocconi University

Cédric Schneider

Copenhagen Business School - Department of Economics

Alminas Zaldokas

Hong Kong University of Science & Technology (HKUST) - Department of Finance

Date Written: March 31, 2013

Abstract

We present evidence that banking development plays a key role in technological progress. We focus on manufacturing firms’ innovative performance, measured by patent-based metrics, and employ exogenous variations in banking development arising from the staggered deregulation of banking activities across US states during the 1980s and 1990s. We find that interstate banking deregulation had significant beneficial effects on the quantity and quality of innovation activities, especially for firms highly dependent on external capital and located closer to entering banks. Furthermore, we find that these results are strongly driven by a greater ability of deregulated banks to geographically diversify credit risk.

Keywords: financial development, banking deregulation, innovation, risk diversification

JEL Classification: G21, G32, O31

Suggested Citation

Amore, Mario Daniele and Schneider, Cédric and Zaldokas, Alminas, Credit Supply and Corporate Innovation (March 31, 2013). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2022235 or http://dx.doi.org/10.2139/ssrn.2022235

Mario Daniele Amore

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Cédric Schneider

Copenhagen Business School - Department of Economics ( email )

Solbjerg Plads 3
Frederiksberg C, DK-2000
Denmark

Alminas Zaldokas (Contact Author)

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong

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