Information disclosure frequency and corporate R&D decisions: evidence from innovative small and medium-sized enterprises

Using a sample of SMEs listed on China’s NEEQ, this paper examines how an increase in disclosure frequency affects corporate R&D decisions. Since 2016, the NEEQ has classified listed firms into an Innovation Tier and a Basic Tier; during 2018-2019, firms in the Innovation Tier were required to disclose quarterly reports, whereas firms in the Basic Tier were only required to disclose annual and semi-annual reports. Using a regression discontinuity (RD) design based on the tiering criteria, we find that the mandatory disclosure of quarterly reports increased R&D investment among Innovation Tier firms. Mechanism tests show that quarterly report disclosure increased the availability of equity financing and lowered the cost of equity capital for Innovation Tier firms, while also strengthening external monitoring by stakeholders, both of which encouraged these firms to undertake more R&D activities.