Abstract: With the rapid development of China's economy, the problem of hard matching between the structure of the real economy and the financial structure has become increasingly serious. A large number of small and medium-sized enterprises cannot meet the growing financing needs. Equity financing and bond financing structure optimization has become a common problem in enterprise financing decisions. Thus, the impact of direct financing structure on economic growth is necessary to be investigated. First, the endogenous growth theory model is modeled to study the dynamic relationship between direct financing structure and economic growth. Then, in order to verify the path of the impact of direct financing structure on economic growth, the intermediary effect test is used to empirically test the influence of technological innovation variables based on the relevant data in China from 2002 to 2019. The results are obtained as follows: (1) The direct financing structure has a nonlinear effect on China’s economic growth; (2) Direct financing structure promotes economic growth by promoting technological innovation; (3) At present, China is still in the stage when it needs to increase the proportion of equity financing to promote rapid economic growth.

Key words: endogenous growth; equity financing; direct financing structure; economic growth; non-linear impact; mediating effects