Impacts of Financial Decentralization on China’s Innovation

Abstract

This paper studies the impact of financial decentralization on innovation activities in China based on the perspective of "finance-innovation". Using the data of China's industrial enterprises above designated size in 30 provinces from 2000 to 2019, this paper verifies the relationship between financial decentralization and innovation, reach conclusions that: Financial decentralization plays a significant role in promoting China's innovation ability; Financial decentralization has obvious regional heterogeneity, which has a positive effect on the improvement of innovation ability in the eastern and central regions with high economic development level, and a negative effect in the western regions.Meanwhile, it's found that the local financial decentralization is more obvious when the industrial structure is more perfect, and the financial decentralization contributes to the improvement of the local industrial structure.In the future, each region should choose the best degree of financial decentralization according to its different financial characteristics, and rationally use it to help local industrial innovation, to promote high-quality economic development.