Financial regulation, financing constraints, and enterprise innovation performance

This paper aims to examine the impact of stringent financial regulation on corporate research and development (R&D) investment. To this end, it takes the introduction of the New Regulation on Capital Management in 2018 as a quasi-natural experiment and selects the data of China's A-share listed companies from 2014 to 2022 as a sample. Results reveal that the introduction of the New Regulation on Capital Management improves enterprises' innovation performance. The lower the financing constraints for enterprises, the more pronounced is the effect of the New Regulation on Capital Management on the enhancement of their R&D investment. •Introducing new regulations improves the enterprise's innovation performance.•The effect is more significant for enterprises with smaller financing constraints.•Reduced financial asset purchases enhance innovation.