Regional Financial Developments and Research and Development Investment-Cash Flow Sensitivity: Evidence on Chinese Public High-Tech Companies

摘要

In a sample of 485 Chinese public high-tech companies, we show that the R&D investment is significantly dependent on internal cash flow. Based on the sizable discrepancies of stock market and financial intermediary developments in the East, Middle and West regions of China, empirical estimation provides strong evidence that the financial developments in both credit and equity markets have large effects on reducing financing constraints. The effects are most significant in the financially advanced East region of China.