Does the Stock Market Boost Firm Innovation?: Evidence from Chinese Firms
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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. 2017/147
Subject:
Econometric analysis Economic sectors Financial institutions Financial markets Initial public offering Probit models Public enterprises Stock markets Stocks
English
Publication Date:
June 30, 2017
ISBN/ISSN:
9781484303726/1018-5941
Stock No:
WPIEA2017147
Pages:
56
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