Does financial supply-side structural reform promote enterprise innovation? evidence from China

Financial supply-side structural reform (FSSR) enhances the capital conversion efficiency of innovative factors effectively by advancing the fintech ecosystem and bolstering risk-sharing mechanisms. With annual panel data on China’s A-share listed enterprises spanning 2007–2022, a staggered difference-in-differences (DID) approach is implemented to examine the causal effects and underlying mechanisms of FSSR on enterprise innovation. The results demonstrate that FSSR significantly enhances enterprise innovation. The mechanism analysis provides evidence consistent with three possible channels: enterprise financial stability, enterprise investment level, and fiscal subsidies. Heterogeneity analyses highlight that the innovation-driving effect is relatively greater for non-state-owned enterprises, capital-intensive enterprises, and enterprises in western regions, while it is relatively smaller for technology-intensive enterprises and enterprises in eastern regions. Findings from our empirical analysis corroborate the case for deepening financial system reform and offer actionable guidance for policymaking aimed at fostering innovation-driven growth.