State-owned equity investment funds and corporate innovation

• The findings reveal that state-owned equity funds investments significantly promote corporate innovation. • The mediating effects of lower debt costs and reduced financing constraints are found to be significant. • The impact of state-owned equity funds investment on the innovation level of state-owned enterprises will be more significant. The State-owned Equity Funds is a investment fund set up by the State to guarantee social security measures. Using data from publicly listed firms on the Shanghai and Shenzhen A-share markets from the year of 2007 to 2022, this paper empirically investigates the impact of State-owned Equity Funds investments on corporate innovation. Furthermore, it explores the mediating role of reduced debt costs and alleviated financing constraints in this process. The findings reveal that State-owned Equity Fund investments significantly promote corporate innovation. Additionally, the mediating effects of lower debt costs and reduced financing constraints are found to be significant. This effect is particularly pronounced in state-owned enterprises.