We investigate the influence of banking development on innovation, including firms that are dependent on external finance. We control, furthermore, the corporate governance impact. Using data from the listed French companies on the SBF 120, we find positive effect of banking development on innovation by financing R&D investments, including firms that are dependent on external finance. Further, when innovation is measured by new patents, the impact of banking development disappear. However, corporate governance seems to affect significantly innovation, including a positive effect of independent outside directors in the board.
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