How does credit-based financial policy affect technological innovation?Evidence from bond issuance in ChinaOA

This study examines the impact of credit-based financial policy on corporate technological innovation.The 2007 corporate bond issuance policy of the Chinese government allowed firms with higher market credit ratings to raise funds through bond issuance.We adopt a multi-period difference-in-differences(DID)identification strategy and find robust evidence that enabling firms to access bond financing significantly enhances their innovation performance.The mechanism operates by improving firms’debt maturity structure and alleviating short-term financing pressure.Additionally,this study confirms that bond issuance can enhance external monitoring and decrease information asymmetry between external investors and issuing firms,thereby promoting corporate innovation.Furthermore,the effect of bond issuance is more pronounced for firms with higher dependence on external financing,and it significantly improves the innovation performance of non-state-owned enterprises(non-SOEs).Overall,this study enriches the literature on credit-based bond issuance policies and technological innovation,and provides policy implications for improving China’s corporate bond market to support innovation-driven development.