The effects of credit policy and financial constraints on tangible and research & development investment: Firm-level evidence from China's renewable energy industry

This article investigates the influences of credit policy and financial constraints on tangible and research & development (R&D) investments from China's firm-level renewable energy industry using dynamic panel generalized moments of method (GMM) analysis. China's renewable energy industry has exuberant tangible investments, and its annual R&D investments are increasing. The empirical results demonstrate that firm-specific features, credit policy and financial constraints have significant impacts on the tangible and R&D investments in the renewable energy industry. Greater commercial bank credits, richer liquid assets, higher returns on assets and better investment opportunities may promote renewable energy firms' tangible investments, while more long-run debts and higher bank dependence may reduce their tangible investments. Larger firm sizes, more short-run debts, higher liability leverages, richer liquid assets and greater bank dependence may increase renewable energy firms' R&D investments, while more long-run debt and greater commercial bank credits may decrease their R&D investments according to the results of the study.