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Does the Stock Market Boost Firm Innovation?: Evidence from Chinese Firms
Author:
Hui He
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,
Hanya Linull

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, and
Jinfan Zhang
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Series:
IMF Working Papers
Volume/Issue:
Volume 2017: Issue 147
Language:
English
Publication Date:
30 Jun 2017
DOI:
https://doi.org/10.5089/9781484303726.001
ISBN:
9781484303726
ISSN:
1018-5941
Pages:
56
Keywords:
WP; IPO firm; natural logarithm; external finance; IPO; Innovation; Financial Constraint; Corporate Governance; State Ownership; China; IPO year; IPO event; IPO decision; IPO benefit; innovation performance; Initial public offering; Stock markets; Stocks; Public enterprises; Probit models
Legal-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.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2017: Issue 147