ABSTRACT This study examines the relationship between commercial insurance coverage and corporate innovation activities. Using firm‐level data from 2010 to 2019 in China, we find that the coverage of commercial insurance is positively associated with both the quantity and quality of corporate innovation. We further identify three plausible channels through which this effect operates: the risk‐sharing channel, the financing channel, and the corporate governance channel. Notably, our results show that firms with higher levels of commercial insurance coverage are more inclined to undertake risky innovation projects. Additionally, the positive relation between corporate insurance and the quantity and quality of innovation is particularly strong for firms in high‐tech industries, those facing significant financing needs and greater financial constraints, as well as those with weaker corporate governance. Our findings offer new insights into how the development of the commercial insurance market can promote economic growth by fostering corporate innovation.
Huang et al. (Sun,) studied this question.
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