Credit availability, overinvestment, and corporate innovation capability

This paper uses panel data from A-share listed companies in China for the period 2011-2022 to explore the impact of credit availability on corporate innovation capability and its underlying mechanisms. The empirical results indicate that ample credit resources significantly enhance corporate innovation capability, with this effect being more pronounced among small and medium-sized enterprises (SMEs) and high-tech enterprises. However, further analysis reveals that overinvestment diminishes the positive impact of credit availability on innovation capability to some extent, suggesting that inefficient allocation of resources may offset the positive effects of credit funding on innovative activities.