Ahmed, Shamim ORCID: 0000-0003-3712-5213, Bu, Ziwen and Ye, Xiaoxia ORCID: 0000-0002-5024-6186
(2023)
Illiquidity, R&D investment, and stock returns.
Journal of Money, Credit and Banking.
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Abstract
<jats:title>Abstract</jats:title><jats:p>We propose a dynamic model of research and development (R&D) venture, which predicts that the positive relation between the firm's R&D investment and the expected stock returns strengthens with illiquidity. Consistent with the model's prediction, empirical evidence based on cross‐sectional regressions and double‐sorted portfolios largely suggests a stronger and positive R&D–return relation among illiquid stocks. A further analysis shows that the important role of illiquidity in the R&D–return relation cannot be explained by factors, such as financial constraints, innovation ability, and product market competition. Collectively, our results suggest that stock illiquidity is an independent driver of the R&D premium.</jats:p>
Item Type: | Article |
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Divisions: | Faculty of Humanities and Social Sciences > School of Management |
Depositing User: | Symplectic Admin |
Date Deposited: | 12 Jul 2022 07:56 |
Last Modified: | 21 Aug 2023 04:13 |
DOI: | 10.1111/jmcb.13053 |
Related URLs: | |
URI: | https://livrepository.liverpool.ac.uk/id/eprint/3158222 |