Government Subsidies, Monetary Policy and Enterprise Innovation - Evidence from Chinese Listed Companies

Enterprise innovation is the internal motive force to promote industrial upgrading and steady economic growth. As the main means to guide enterprise behavior, monetary policy and government subsidies are getting more and more attention by all walks of life. Based on the data of 1,740 listed companies in 31 provinces and autonomous regions in China during 2009-2015 years, this paper explores the impact of government subsidies on enterprise innovation from the perspective of monetary policy. The empirical results show that: (1) government subsidies can stimulate enterprise innovation; (2) there is a significant negative correlation between monetary policy and enterprise innovation. Enterprises reduce innovation investment during the period of loose monetary policy, while during the period of tightening monetary policy, enterprises will increase innovation investment; (3) overall, the Chinese government subsidies on the enterprise innovation are not affected by monetary policy; (4) when distinguishing the enterprise nature, the impact of monetary policy on the relationship between government subsidies and enterprise innovation is significantly different.