Does Stock Liquidity Enhance or Impede Firm Innovation?

• 成果类型: Article
• 署名作者: Fang, Vivian W.; Tian, Xuan; Tice, Sheri
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; Indiana University System; Indiana University Bloomington; IU Kelley School of Business; Tsinghua University; Tulane University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12187
• 发表日期: 2014
• 页码: 2085-2125
• 关键词: institutional investors; market liquidity; INVESTMENT; incentives; governance; COSTS; SENSITIVITIES; takeovers; earnings; EXIT

摘要

We aim to tackle the longstanding debate on whether stock liquidity enhances or impedes firm innovation. This topic is of interest because innovation is crucial for firm- and national-level competitiveness and stock liquidity can be altered by financial market regulations. Using a difference-in-differences approach that relies on the exogenous variation in liquidity generated by regulatory changes, we find that an increase in liquidity causes a reduction in future innovation. We identify two possible mechanisms through which liquidity impedes innovation: increased exposure to hostile takeovers and higher presence of institutional investors who do not actively gather information or monitor.