| In today’s world,competition is increasingly centered around the competition for intellectual capital,and innovation has become the core competitiveness of the company.2021 July 30,the Central Political Bureau meeting clearly proposed to strengthen scientific and technological innovation,speed up the solution of the "neck" problem,and vigorously advocate the development of "specialized and special new" companies."The development of "precise and specialized" companies is strongly advocated.The "precise and professional" company needs to adhere to the development strategy of specialization,long-term focus and deep plowing in a certain part of the industry chain or a certain product.The degree of focus of the company’s innovation path depends on the company’s innovation strategy.Based on the degree of focus of the company’s innovation,the existing research classifies the company’s innovation strategy into exploitative innovation with high innovation focus and exploratory innovation with low innovation focus.The difference in strategy between "exploring new possibilities" and "exploiting old certainties" is reflected in the company’s operating performance and market performance.The identification of innovation strategy differences usually requires the analysis of unstructured non-financial information such as company product types,technology patents,etc.,and the average market investor is generally not capable of correctly processing this complex information in a timely manner.Institutional investors,as important participants in capital markets,play a key role in company financing,market liquidity and corporate governance.Therefore,the shareholding preferences of institutional investors in terms of their focus on company innovation can profoundly affect the development path of company technological innovation.In the context of financial supply-side reform,the role of institutional investors,such as public funds,in the high-quality development of capital markets and financial stability has been emphasized.In the public fund industry,there are not only passive index funds such as ETFs,but also active funds exist.With the development of events such as China-US trade friction,the new crown epidemic and the"specialization" policy,can active funds use their initiative to support the high-quality development of the capital market?An important vehicle for high-quality capital market development is the innovation capability of listed companies.The ability of institutional investors,represented by active funds,to discover the fundamental value and innovation potential of listed companies is crucial for enhancing the pricing efficiency of the stock market and helping listed companies to finance innovation.Therefore,this paper focuses on exploring the relationship between company innovation focus and institutional investors’shareholding decisions,comprehensively examining institutional investors’ shareholding preferences for company innovation focus,and further analyzing the support of listed companies by institutional investors represented by active funds and their impact on fund performance.The research ideas and contents of this paper are as follows:firstly,using the data of invention patent classification numbers of A-share listed companies,we use text analysis method to construct indicators to measure the degree of company innovation focus,and analyze the characteristics of company innovation focus indicators and their influencing factors in detail.Secondly,we empirically examine the relationship between innovation focus and institutional investors’ shareholding decisions,and analyze the underlying influence mechanism.Finally,to test whether institutional investors,the "smart investors",can achieve better investment performance by considering firm innovation focus as an influencing factor in their holding decisions?This paper constructs a transaction-based Active Innovation Focus(AIF)indicator using the holdings details of an open-end actively managed pari-mutuel fund.The relationship between Active Innovation Focus and future fund performance is further examined using this indicator.The main research content and findings of this paper are summarized as follows.First,based on the data of invention patent classification numbers of A-share listed companies from 2007 to 2020,we construct an innovation focus index to measure the differences of companies’ innovation strategies and study the relationship between companies’ innovation focus and institutional investors’ shareholding decisions.The results found that the higher the innovation focus of a company,the more the number of shares held by institutional investors and the higher the shareholding ratio.The mechanism analysis shows that the higher the innovation focus of a company,the more profitable it is,the lower the risk of bankruptcy,with higher surplus surprises and excess expected returns and lower volatility risk.Further exploring the impact of policy uncertainty shocks from US-China trade frictions and bi-innovation,we find that more institutional investors prefer to hold companies with higher innovation focus if policy uncertainty increases in the future,and conversely,institutional investors’ shareholding preferences do not change significantly.This empirical evidence helps to understand the relationship between differences in firms’innovation strategies and institutional investors’ shareholding decisions,and has important practical implications for firms to adjust their innovation strategies to attract capital.Second,based on open-end actively managed biased funds’ shareholding details data and listed companies’ invention patent classification number data from 2007 to 2020,fund portfolio active innovation focus indicators are constructed to explore active funds’ support for listed companies and their impact on fund performance.The empirical results find that the higher the active innovation focus of a fund portfolio,the better the future performance of the fund.The company-level mechanism analysis finds that the higher the innovation focus of a company,the higher its cross-sectional expected stock returns,and is more significant in the group with less media coverage,suggesting that companies with high innovation focus are easily undervalued by the market due to the limited attention bias of general investors;the fund-level mechanism analysis finds that the fund portfolio active innovation focus is more significantly related to fund performance in the group of fund managers with stronger stock selection ability.The positive correlation between active innovation focus and fund performance is more significant in the group of fund managers with stronger stock selection ability,indicating that fund managers with stronger stock selection ability have the ability to identify undervalued companies with high innovation focus and thus achieve higher excess returns.This empirical evidence suggests that a focus on non-financial,unstructured data analysis of companies can lead to better investment performance for funds,and provides empirical evidence for policymakers to guide the creation of "specialization" thematic funds to promote high-quality development of"specialization" companies.For policy makers,this provides empirical evidence to guide the creation of "specialised" thematic funds to promote high-quality development of"specialised" companies.Compared with existing studies,this paper may have several academic contributions as follows.First,this paper constructs indicators to measure the degree of innovation focus of A-share market listed companies using invention patent classification number data,and discusses in detail their statistical characteristics and influencing factors,which contribute to the empirical research related to the innovation focus of companies.Second,based on A-share market listed companies,this paper analyzes in detail the differences in a series of economic consequences such as business performance,business risk and stock market performance of companies with different degrees of innovation focus,and these findings are also a useful addition to the studies related to the economic consequences of companies’preferences for different degrees of innovation focus.Finally,a series of empirical findings on the innovation focus of companies in this paper can shed some light on the market value and enhancement of the market value of "specialized" companies with "specialization".Second,although some studies have discussed the impact of firm innovation inputs or innovation outputs on institutional investors’ shareholding preferences,domestic studies have not addressed whether innovation strategies as leading firm innovation are included within investment decision considerations by institutional investors.This paper examines whether institutional investors pay attention to differences in firms’ innovation strategies for A-share market listed companies and institutional investors,and the empirical findings of this paper contribute to the literature on the factors influencing institutional investors’shareholding decisions.At the same time,this empirical evidence contributes to an in-depth understanding of the relationship between firms’ innovation strategies and institutional investors’ shareholding decisions,which has important practical implications for firms to adjust their innovation strategies to attract capital and develop innovation support policies with stability.Third,the literature examining the sources of the ability of actively managed funds to obtain abnormal returns from the perspective of unstructured invention patent classification number data is added.Existing studies examine the sources of fund’s ability to obtain abnormal returns in terms of fund’s own characteristics,active management ability,social relationship networks,and trading market anomalies,respectively.Unlike theirs,this paper finds that fund managers have the ability to handle more complex unstructured patent classification number data and thus identify "fine specialty" companies with high innovation focus that are undervalued by the market,demonstrating that some fund managers have strong stock selection ability.Secondly,further mechanism analysis reveals that fund managers with high education,long years of experience and star managers with strong information analysis ability are able to exploit the innovation focus premium to achieve excess returns in the fund portfolio.This empirical finding also contributes to the literature related to active fund managers’ ability to exploit stock market anomalies to obtain excess returns. |
