Can Bank Debt Governance and Internal Governance Promote Enterprise Innovation?

This paper examines the interaction between bank debt and internal corporate governance that impact enterprise innovation, and verifies the importance of favorable interactions between internal and external governance mechanisms to improving enterprise innovation. The results show that management equity incentives cannot improve enterprise innovation, but bank debt, management compensation incentives, board governance and major shareholder governance can all effectively improve corporate governance. Moreover, among the mechanisms which improve enterprise innovation, bank debt has a positive interactive relationship with management compensation incentives and board governance mechanisms and has a synergistic effect on enterprise innovation. After further dividing the sample by industry, it is found that such interactions and synergies are more significant in technology-intensive industries.