Does bank competition boost corporate innovation? Evidence from China

This study constructs banking competition indicator from the perspective of geographic proximity and investigates the causal link between bank competition and corporate innovation in China. Our findings revealed that bank competition boosts corporate innovation. The instrumental variable estimations and robustness checks further supported the correlation. Mechanism analysis documented that the positive impact of bank competition on corporate innovation could be attributed to access to credit. Further analysis showed that the impact of bank competition on corporate innovation only existed in non-state-owned enterprises and enterprises with higher productivity. This study provides a reference for promoting communication between the real economy and the financial sector.