Stock Liquidity、Investment Efficiency And R&D Investment

Investment is one of the troika of economic growth and engine of Macroeconomic.And corporate investment activities are especially essential for their own value realization and even stable development of one country.In the perfect capital market, when the capital flows freely,the company applies Tobin q to making choices of investment expenditure and investment projects.However,in the reality the capital market is not completely perfect.And the flowing capital always meet friction. So the result is that corporate investment frequently keep away from the optimal investment amount,leading to Underinvestment or Overinvestment.The most two mental factors which influence corporate investment efficiency are Information asymmetry and agency cost. Other scholars research investment efficiency from the perspective of other factors like corporate governance,executive manager compensation contracts, government intervention and supervision of major shareholders.There are few scholars combine stock liquidity and companies capital allocation.But recent researches prove that there is close relationship between stock liquidity and companies capital allocation.Stock liquidity is the core of Micro-market structure and an ability of stock market that buy or sell stocks by reasonable prices and also.Naikang Gu(2010) proved stock liquidity and Shares information content have Inverted U-shaped relationship.Qinyuan Li(2009)put the increase of stock liquidity was often accompanied by decrease of information asymmetry, and he said these are likely lead to improving the information environment so as to promoting business investment.The research of Dongwei Su(2013) showed stock liquidity will help improve the sensitivity of CEO pay and reduce agency costs.So, whether or not stock liquidity will affect the efficiency of capital allocation of listed companies? This paper would like to explore further about relationship between a R & D investment and stock liquidity.Through literature research and theoretical analysis,we found several evidence prove our idea.Firstly, Maug (1998)put that the high stock liquidity will facilitate entrance of large investors into the company, who could help to slow down the short-sighted management to improve the overall performance of the company.Secondly,stock liquidity will help improve the sensitivity of CEO pay and reduce agency costs.Thirdly, high stock liquidity stifles innovation by making it easier for dissatisfied block holders or institutional investors to exit. This may pressure managers to be too short-sighted, or myopic,when selecting investment projects.Conversely,dedicated institutional investors do not alter their holdings in response to a change in liquidity and their presence appears to mitigate investor myopia and spur innovation.Fourthly,liquidity of the stock influence investment activities through the mechanism of the stock information content.According to related paper, stock liquidity will help improve the stock price information content. Rich information content of the stock improved the transparency of listed companies, help alleviate information asymmetry between management and external shareholders,and strengthen external shareholders’ supervision of listed companies.From the above analysis of literature analysis and theory, this article put forward two hypotheses.First one is the faster stock liquidity is, the lower efficiency of non-business investments will be. The second one is the stock liquidity, the lower the corporate R & D investment.In order to verify the above two hypotheses, this paper use data from 2010 to 2014 of A-share listed non-financial companies as sample and exclude 1% of the maximum and minimum extremes the main variables. The Author use HAUSMAN test and correlation coefficient analysis and determine to use the fixed effects model to research if stock liquidity influences the enterprise capital allocation, including the efficiency of investment and R & D investment two ways.Under empirical research,this article utilize study result of Richardson (2006) and break down companies’ overall investment into two parts including investment in maintenance and new investment.The amount of new investment is the difference between overall investment and investment in maintenance. Then according to Naikang Gu(2007), Haiyan Zhong(2010), this paper build models to compute inefficient investment. Then,we use stock liquidity indicators as the main explanatory variables and inefficient investment as explanatory variables to built model to examine the effects between stock liquidity and listed company’s non-efficiency investments. In order to eliminate the model possible reverse causality,this article uses a lagged average annual turnover indicators to represent stock liquidity. By the way,the corporate R & D investment is not included in the amount of investment.The empirical research results of the panel data illustrate that the higher stock liquidity of listed companies in year t, the lower non-efficiency investment will be.Because high liquidity will facilitate the entry of block holders who actively monitor which presumably would help mitigate managerial myopia and improve performance.Another supplementary study result indicates if that non-financial A-share listed company’s stock liquidity become higher,their corporate R & D investment will be reduced next year. exogenous increase in liquidity, caused by decimalization, leads to a higher level of ownership by transient and quasi-indexer institutional investors.Furthermore,for transient and quasi-indexers,the increase in institutional ownership caused by an exogenous increase in liquidity reduces innovation productivity. The results seem to suggest that the higher liquidity following decimalization facilitates the entry of fickle transient and quasi-indexer institutional investors who do not gather private information but instead put short-term pressures on managers.Study conclusions suggest that stock liquidity is not just a way to enhance the value of the assets but impact efficiency of capital allocation of assets. Finally, policy recommendations of this paper including appropriating relaxation of trading restrictions,launching a pilot project of market maker system and open credit trading and short selling to enhance the liquidity. Secondly,crack down on insider information trading for listed companies in China and create a comprehensive health information environment for stable development of the secondary market. Finally, innovation-invested activities will help enterprises improve corporate value and long-term development. So managers of listed companies should reduce Short-sighted behavior.The main characteristic of this paper is combination stock liquidity and investment behavior.R & D investment is a special form of investment. So the last part include test of relationship between stock liquidity and R & D investment...