Abstract:Coordinating the risk-return relationship among the key stakeholders, including bond investors, in innovation activities, is helpful for the company to realize the high returns from high-risk innovation activities. Taking Chinese A-share listed companies issuing bonds from 2007 to 2022 as the sample, this empirical study finds that under the current circumstances in our country, bond contract terms favoring bond investors promote the corporate innovation performance. Mechanism test shows that the restrictive terms of bond convenants which provide risk protection for bond investors promote innovation performance by reducing agency costs, and the price terms of convenants which provide risk compensation for bond investors promote innovation performance by promoting the company's overall risk-taking. Further tests show that the creditor protection embodied in the terms of bond convenants is more effective in promoting innovation performance among innovative companies, state-owned listed companies, companies in regions with poor institutional environment, and companies in areas with low levels of financial development. This study reveals the important influence of bond investors on corporate innovation activities, enriches and expands the relevant literature on the impact of creditors on corporate innovation performance, and provides empirical evidence for strengthening the protection of creditors. The conclusion has enlightening significance for Chinese companies to coordinate the relationships of stakeholders and improve innovation performance.