Author: Won Sung(Gachon Univ.), Hosung Jung(Dongduk Women's Univ.)

This study empirically examines the effects of changes in bank liquidity and firms’ innovation activities on loan supply using firm–bank panel data over the period 2013–2023. To address endogeneity concerns—such as reverse causality between R&D investment and loan volumes, as well as omitted variable bias—we adopt a two-stage least squares (2SLS) identification strategy that incorporates firm–bank fixed effects and year fixed effects. As instrumental variables, we use the industry-level average R&D intensity and the share of R&D-performing firms, excluding the focal firm. These instruments are expected to significantly influence individual firms’ R&D decisions through competitive pressure and informational spillovers within industries, while remaining exogenous to banks’ firm-specific lending decisions.

The empirical results indicate that an increase in the bank liquidity premium is associated with tighter credit constraints for firms with higher R&D intensity. This effect is particularly pronounced for small and medium-sized enterprises (SMEs) and mid-sized firms, which generally face more limited access to external finance than large firms. By employing micro-level panel data, this study identifies heterogeneous transmission channels through which financial shocks affect the credit accessibility of innovative firms. The findings provide policy implications suggesting the need to strengthen technology-based financing and relationship banking, especially during periods of liquidity stress.