International Linkage, Bank Financing, and Firm Innovation
44 Pages Posted: 13 Dec 2019 Last revised: 24 Sep 2020
Date Written: November 26, 2019
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: Suggested Citation