This article takes China’s A-share listed companies from 2008 to 2017 as a sample to study the relationship between industry-finance integration and corporate innovation, and discusses the differential impact of industry-finance integration on corporate innovation under different agency costs and financing constraints. In addition, in order to clarify the path that the combination of industry and finance affects corporate innovation, this article further explores the mechanism of the combination of industry and finance on corporate innovation. The study found that at this stage, the integration of domestic and domestic financing has a significant “crowding out” effect on corporate innovation, and this “crowding out” effect is even more pronounced in companies with higher agency costs and greater financing constraints. After controlling for endogeneity and performing a robustness test, the conclusion still holds. Further mechanism inspections have shown that the combination of production and finance increases the business risk of the enterprise, which in turn crowds out innovation. The above research conclusions show that at the current stage, the combination of industry and finance of listed companies in China has not effectively achieved the long-term strategic goals of the enterprise, but has increased the business risk of the enterprise, inhibited the innovation investment of the enterprise, and caused the real economy to face a situation of “depreciation to reality” threat. This article provides micro-level evidence for China’s domestic financial integration practice, and has certain reference significance for how regulatory authorities can guide the integration of industry and financial integration and how Chinese enterprises can prevent and control financial risks. The main contribution of this article is to combine the institutional background of China’s economic transformation and consider the differences between the internal and external environments facing different companies. The empirical analysis tests the relationship between the combination of industry and finance and corporate innovation. In addition, the role of this relationship is further studied from the perspective of operational risk, which provides a certain decision-making reference for Chinese enterprises on how to improve the effectiveness of the combination of industry and finance.
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