Does the Stock Market Boost Firm Innovation? : Evidence from Chinese Firms

Author/Editor:

Hui He ; Hanya Li ; Jinfan Zhang

Publication Date:

June 30, 2017

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

The paper analyses the effect of the stock market on firm innovation through the lens of initial public offering (IPO) using uniquely matched Chinese firm-level data. We find that IPOs lead to an increase in both the quantity and quality of firm innovation activity. In addition, IPOs expand a firm’s scope of innovation beyond its core business. The impact of IPOs on firm innovation varies across financial constraints, corporate governance, and ownership structures. Our results further illustrate that IPOs induce a firm to increase the number of inventors and enable better retention of existing inventors after the IPO. Finally, we show that the enhanced innovation activity resulting from IPOs increases a firm’s Tobin’s Q in the long run.

Series:

Working Paper No. 17/147

Subject:

English

Publication Date:

June 30, 2017

ISBN/ISSN:

9781484303726/1018-5941

Stock No:

WPIEA2017147

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

56

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