Quasi-experimental study reveals innovation-oriented credit policies increase trade credit in Chinese firms, highlighting unintended loan diversion along supply chains.
Key Points
To investigate how innovation-oriented credit policies influence corporate financing behavior and informal credit reliance in emerging economies.
Exploited China's Promote Sci-Tech and Finance Integration initiative as a quasi-natural experiment.
Analyzed an unbalanced panel dataset of Chinese A-share listed firms from 2006 to 2020 using a staggered difference-in-differences (DID) model.
Innovation credit policies increased reliance on trade credit rather than reducing informal finance, as firms diverted subsidized loans into receivables and prepayments along supply chains.
Credit diversion effects were strongest among politically unconnected, non-high-tech firms, and firms engaging in R&D reporting manipulation to fund short-term financial intermediation.