Abstract: Innovation is the main way for enterprises to gain competitive advantage, and equity financing is an important source of funds for enterprise innovation. In order to improve the ability of the capital market to serve the real economy, the regulatory authorities have repeatedly reduced the barriers to entry for equity refinancing in an attempt to provide broad financial support for enterprise innovation. So, does the equity refinancing behavior of listed enterprises promote the level of enterprise innovation? At a time when refinancing rules are constantly changing, the answer to this question becomes very important. The 2021 Government Work Report proposes to “reinforce the foundational role of competition policies.” This paper further answers the question of what role competition factors play between corporate equity refinancing and innovative behavior. Against the above background, this paper takes China’s A-share manufacturing listed enterprises from 2006 to 2019 as research sample, and regards the equity refinancing behavior of listed enterprises as a quasi-natural experiment. Firstly, based on the propensity score matching difference-in-differences (PSM-DID) model and the principle of natural experiment, this paper empirically studies the impact of equity refinancing of listed manufacturing enterprises on the level of enterprise innovation, and explains its impact mechanism from the perspective of competition. This paper finds that equity refinancing has significantly improved the level of enterprise innovation, and this conclusion is still valid after a series of robustness tests. However, this improvement effect is only significant in non-public issuance and cash subscription refinancing. The test of the impact mechanism from the competition perspective shows that the fierce competition within the industry can enhance the improvement effect of equity refinancing on enterprises’ innovation input. Secondly, this paper adds enterprises’ consideration of the pursuit of competitive advantage, and discusses the impact of equity refinancing on the level of enterprise innovation under the heterogeneity of enterprises’ competitive advantage from aspects of bargaining power and life cycle. The research results of this paper are as follows. Enterprises with weak bargaining power and insufficient competitive advantages in the start-up and growth stages, after equity refinancing, will promote innovation more significantly than enterprises with strong competitive advantages. Finally, this paper considers the internal conditions of equity refinancing to enhance the level of enterprise innovation from the perspective of enterprise characteristics, and the research results show that refinancing only promotes enterprise innovation in enterprises with high internal financing demand and low on-the-job consumption level of the management.

Compared with existing literature, the main contributions of this paper are as follows. (1) From the perspective of competition, this paper theoretically analyzes and empirically tests the mechanism of the impact of equity refinancing on the level of enterprise innovation. Most of existing literature studies the motivation and economic consequences of equity refinancing. Combining with the market competitive environment, this paper reveals the impact of industry competitive environment on the strategic decision-making consequences of enterprises, enriches related research on the economic consequences of equity refinancing, and provides theoretical basis for regulators to improve the market competition mechanism. (2) This paper not only discusses the moderating effect of market competition on the relationship between equity refinancing and enterprise innovation level, but also considers the internal and external conditions for equity refinancing to enhance enterprise innovation level. This paper analyzes the role of external competitive pressure, internal financing demand and moral value orientation of the management in promoting the level of enterprise innovation, and provides empirical evidence for that, which expands research on the impact of enterprise characteristics on the decision-making effect, and provides a broader perspective for research on the impact of equity refinancing on innovation level. (3) This paper considers the equity refinancing behavior of listed enterprises as a quasi-natural experiment, and studies the influence of equity refinancing on the level of enterprise innovation by using a standard natural experiment model according to the principle of natural experiment.

The research paradigm of this paper provides a methodological reference for the follow-up research on such problems. (4) The research conclusion of this paper provide a new perspective for the regulatory authorities to strengthen the qualification examination and supervision of equity refinancing and identify the refinancing motives of listed enterprises, and also provide empirical evidence and data support for the regulatory authorities to improve the existing refinancing system and mechanism in practice.

Key Words: Equity Refinancing; Enterprise Innovation; Market Competition; Funding Gap; Bargaining Power; Enterprise Life Cycle