Arm’s Length Financing and Innovation: Evidence from Publicly Traded Firms
研究发现依赖公开债务和股权等保持距离型融资的美国公司，比依赖关系型银行融资的公司创新更多、质量更高，可能因为前者对实验的灵活性和容忍度更高。
Using a large panel of U.S. companies, I document that firms that rely more on arm’s length financing, such as public debt and equity, innovate more and have higher-quality innovations than firms that use other sources, such as relationship-based bank financing. I hypothesize that one possible reason for this finding is the greater flexibility and tolerance to experimentation associated with arm’s length financing. I find support for this hypothesis by showing that firms with more arm’s length financing have greater volatility of innovative output, and are more likely to innovate in new technological areas. Furthermore, focusing only on bank financing, I demonstrate that firms have more novel innovations if they borrow from multiple banks, use predominantly credit lines, and have less intense covenants. I address potential endogeneity concerns by using instrumental variable analysis, and by showing that innovation increases significantly after new public debt offerings and seasoned equity offerings, but does not change after new bank loans. This paper was accepted by Gustavo Manso, finance.