Analyzing the Impact of Local Government Debt on Business Innovation in China
DOI:
https://doi.org/10.54097/tjfr9256Keywords:
Local government debt (LGD); business innovation; financing constraintsAbstract
In the critical stage of China's economic development towards "risk prevention" and "stable growth", the importance of preventing debt risk and incentivizing business innovation has gradually become more prominent, so it is necessary to study the impact of local government debt (LGD) on business innovation. Based on the existing studies on the relationship between LGD and business innovation, this paper summarizes and analyzes them in an attempting to clarify the mechanisms through which LGD acts on business innovation. The study shows that LGD crowds out enterprise research and development (R&D) investment by increasing financing constraints, inhibiting business innovation by weakening enterprise risk-taking capacity, and positively and negatively affecting business innovation through debt investment in different industries and debt-service dependence. In addition, this paper shows that LGD has a stronger crowding-out effect on exploratory innovation of enterprises and on enterprises that are not state-owned, large enterprises and those located in areas with low financial levels. The above conclusions can provide reference for preventing debt risk, promoting business innovation and boosting economic development.
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