Corporate financialization, financing constraints, and innovation efficiency—Empirical evidence based on listed Chinese pharmaceutical companies

The relationship between financialization and innovation has become a common focus of academic attention. This paper analyzes the influence of corporate financialization on innovation efficiency based on balanced panel data of listed Chinese pharmaceutical companies from 2015 to 2020. Also, it examines the relationship between corporate financialization and innovation efficiency under different levels of financing constraints and the moderating mechanisms that exist. The results of the study show that corporate financialization negatively affects innovation efficiency and that this effect has a lag; corporate financialization hurts innovation efficiency across the different regions and firm nature, with a less inhibiting effect for eastern firms and non-state-owned firms; further tests of the mechanism of action show that there is a non-linear negative relationship between corporate financialization and innovation efficiency. And the inhibition of corporate financialization on innovation efficiency decreases as the level of financing constraints rises. Based on the above findings, this study provides warnings and recommendations for pharmaceutical companies to finance their innovative activities through financialization.