The interaction effect of project-level IT investment and R&D investment on corporate credit risk

Purpose Existing studies have mainly examined the effects of IT or R&D investment on firm outcomes, but few have systematically assessed how these investments relate to corporate credit risk. This study aims to investigate how project-level IT investment and R&D investment, individually and interactively, influence corporate credit risk. Design/methodology/approach This study constructs a panel dataset from the CSMAR database, covering 1,446 firm year observations between 2012 and 2024, and employs fixed effects regression models to examine the direct and interactive effects of project level IT and R&D investments on corporate credit risk, incorporating lagged variables to capture delayed realizations of investment effects. This study also considers heterogeneity across IT system types and R&D level. Findings Project level IT investment and R&D investment are each significantly associated with lower corporate credit risk. Moreover, the interaction between IT and R&D is significantly associated with firms’ credit risk, with this association being more pronounced among R&D intensive firms. In addition, firms that deploy multiple types of information systems exhibit stronger IT R&D interaction associations with credit risk mitigation than firms relying on single system deployments. Research limitations/implications While this study provides valuable insights, several limitations warrant consideration. First, our measure of project level IT investment focuses on core enterprise systems and may not capture the full scope of firms' technology spending. Second, the reliance on manual text screening supported by “Jieba” segmentation constrained the sample size. Third, the analysis is based on publicly listed firms in China, which may limit the generalizability of the findings to other institutional contexts. Finally, although lagged specifications and instrumental variables are employed, endogeneity concerns cannot be fully ruled out. Practical implications From a managerial perspective, this study provides three implications. First, firms should recognize project level IT investments as more than operational expenditure: they directly improve credit standing and can lower financing costs. Second, managers should avoid short term cutbacks in R&D, since sustained innovation spending contributes to long run credit resilience. Third, our findings suggest that aligning IT and R&D strategically, and considering interactions across different IT systems, may provide added benefits in reducing credit risk, though managers should approach portfolio strategies with careful evaluation of costs and integration challenges. Originality/value This study contributes to the literature by offering nuanced evidence on the interplay between project level IT investment, R&D investment, and credit risk: firstly, this paper operationalizes project level IT investment using granular data on information system construction to better assess its impact on credit risk. Second, this research provides novel empirical evidence on the interaction between IT and R&D investments in mitigating credit risk. Third, this work uncovers heterogeneity effects across IT system types and R&D intensities.