FINANCING EFFICIENCY AND CORPORATE INNOVATION: EVIDENCE FROM CHINESE MANUFACTURING FIRMS

Abstract

This study explores how financing efficiency shapes corporate innovation within China’s manufacturing sector, emphasizing the mediating roles of financing constraints and supply chain finance. The research employs Data Envelopment Analysis (DEA) to evaluate financing efficiency and applies panel regression models to test the proposed relationships. The results demonstrate that greater financing efficiency significantly enhances firms’ innovation performance. Mechanism analysis indicates that this relationship operates through the relaxation of financing constraints and increased participation in supply chain finance. Regional heterogeneity tests reveal that the positive effect is stronger in Central and Western China than in the Eastern region. Furthermore, corporate governance, operational efficiency, information disclosure, social capital, market competition, and government subsidies are identified as major determinants of financing efficiency, whereas excessive government regulation has a modest negative influence. By integrating both direct and indirect pathways, this study enriches the theoretical understanding of how financial mechanisms drive innovation and provides practical insights for policymakers and business leaders seeking to improve innovation through more efficient financing systems.