Asset Pledgeability and Firm Innovation
59 Pages Posted: 3 Sep 2017 Last revised: 11 Apr 2021
Date Written: April 11, 2021
We examine the effect of debt financing capacity on firm innovation by employing a shock that increases firms’ asset pledgeability. We find that firms increase their innovation activities after the shock, and the increase is greater in regions with more effective enforcement and in firms with more tangible assets, even after using a matching firm analysis. We also find that firms with more tangible assets are associated with a higher level of bank loans after legal enactments. After using three instrumental variables, we find that the increase in innovation is stronger in firms with higher market tangibility.
Keywords: Asset pledgeability, Financing Capacity, Collateral, Patent
JEL Classification: G31, G33
Suggested Citation: Suggested Citation