International Linkage, Bank Financing, and Firm Innovation

44 Pages Posted: 13 Dec 2019 Last revised: 24 Sep 2020

See all articles by Yuxi Cheng

Yuxi Cheng

George Washington University

Date Written: November 26, 2019

Abstract

In this study, I explore the role of international bank linkages on firm innovation. I find robust evidence that borrowing from international-linked banks leads firms to become more innovative, in terms of both quantity and quality of innovation outcomes. Firms experience larger innovation gains borrowing more intensively from familiar international-linked banks and have higher growth opportunities in general. I argue that international bank linkages help connected banks share information and screen firms with higher innovation qualities, allowing additional credits available to higher-quality firms in conducting more innovation activities. Overall, the results shed light on the real effects of international bank linkages and the underlying determinants of innovations.

Keywords: International Bank Linkage, Innovation, Risk-sharing, Information-sharing, Screening

JEL Classification: F34, G14, G15, G21, O31

Suggested Citation

Cheng, Yuxi, International Linkage, Bank Financing, and Firm Innovation (November 26, 2019). Available at SSRN: https://ssrn.com/abstract=3493864 or http://dx.doi.org/10.2139/ssrn.3493864

Yuxi Cheng (Contact Author)

George Washington University ( email )

Washington, DC 20052
United States

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