Stock liquidity and enterprise innovation: new evidence from China |
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Authors: | Jun Wen Gen-Fu Feng Zhao-Zhen Feng |
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Institution: | School of Economics and Finance, Xi’an Jiaotong University, Xi’an, People’s Republic of China |
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Abstract: | We employ data of 6194 firm-year observations for 1058 listed companies in the period 2006–2013 to investigate the interaction between stock liquidity and enterprise innovation in China and confirm that an increase in stock liquidity raises the number of patents granted, R&D investment, and the innovation efficiency of state-owned enterprises, while it decreases innovation significantly in private firms. These findings are also supported by quasi-natural experiments under the split-share structure policy reform and the adjustment of the stamp duty rate using propensity score matching and difference-in-difference methods. We then identify two possible mechanisms through which liquidity increases innovation: the entry of long-term and strategic institutional investors and the gradual privatization of SOEs. Several policy implications are provided in accordance with our findings. |
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Keywords: | Stock liquidity technological innovation split-share structure reform stamp duty China |
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