Debt trap or innovation motivation? the impact of public debt on corporate substantive innovation: Evidence from Chinese listed companies

This study examines the impact of local government public debt on substantive enterprise innovation. We found that expanding public debt significantly reduces corporate substantive innovation by strengthening financing constraints and decreasing fiscal subsidies. This correlation was more significant in regions with lower levels of financial development and less significant in regions with higher levels of financial development. Moreover, the correlation was more significant in small firms with lower research and development (R&D) input but not significant in large firms with higher R&D input.