The game mechanism of how liquidity affects Chinese firm innovation
NI Xuanming1, WANG Shunlong1, HUANG Song1, ZHAO Huimin2
1. School of Software & Microelectronics, Peking University, Beijing 100871, China; 2. School of Business, Sun Yat-Sen University, Guangzhou 510275, China
Abstract:This paper built a game theory model to discuss how liquidity affects Chinese firm innovation from the perspective of information asymmetry and goal incompatibility. The study found liquidity affects Chinese firm innovation in two ways:Threat of takeover and different type of shareholders. In terms of threat of takeover, liquidity would harm innovation activities. In terms of type of investors, liquidity's effect differs from short-term investors and shareholders. The existence of short-term investors will make liquidity impede innovation. When firm's main investors are shareholders, influence on innovation from liquidity is depended on whether improvements of firm's valuation by rising innovation input is more than the reduction through decreasing short-term return. Taking characteristics of state-owned and non-state-owned enterprises into account, we found that the stock liquidity of private company impedes its innovation and the stock liquidity of state-owned company boosts its innovation. Then we take Chinese stock market as a "natural lab" to test the conclusion of theoretical analysis with fixed effect (FE) model. The result of empirical test is similar with conclusion of theoretical analysis and reinforces the result of game theory model.
倪宣明, 王顺龙, 黄嵩, 赵慧敏. 股票流动性影响我国企业科技创新的博弈机制[J]. 系统工程理论与实践, 2019, 39(12): 3048-3060.
NI Xuanming, WANG Shunlong, HUANG Song, ZHAO Huimin. The game mechanism of how liquidity affects Chinese firm innovation. Systems Engineering - Theory & Practice, 2019, 39(12): 3048-3060.
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