Innovation and Price Informativeness

Authors

Ani Manakyan Mathers, Salisbury University
Bin Wang, Marquette UniversityFollow
Xiaohong Wang, Northeastern Illinois University

Document Type

Article

Publication Date

Summer 2017

Publisher

Wiley

Source Publication

Financial Management

Source ISSN

0046-3892

Original Item ID

10.1111/fima.12142

Abstract

We study whether the innovation decisions of a firm are improved as a result of information reflected in the firm's stock price. We show that firms with more informative stock prices, as measured by price nonsynchronicity, have better innovation outcomes, as measured by the number of patents and patent citations. Our results are not driven by managerial private information and are robust to various alternative specifications. We also find that price informativeness is more important to innovation when managers are less experienced or face greater uncertainty about the optimal innovation strategy, and that these effects are primarily observed in small- and mid-sized firms where additional information may be of greater value. Our results are consistent with the notion that capital markets can have real effects on the economy.

Comments

Accepted version. Financial Management, Vol. 46, No. 2 (2017): 523-546. DOI. © 2017 Wiley. Used with permission.

Recommended Citation

Manakyan Mathers, Ani; Wang, Bin; and Wang, Xiaohong, "Innovation and Price Informativeness" (2017). Finance Faculty Research and Publications. 162.
https://epublications.marquette.edu/fin_fac/162