The Study On Effect Of Stock Liquidity On Firm's Innovation

In the context of "new normal" economy,the traditional extensive pattern of economic growth mode,which merely depends on capital and demographic dividend,is faced with a severe challenge.The innovation behavior of enterprises is the key to realize the transition from traditional economic growth mode to new economic growth mode which relies on the improvements of technology and production efficiency.As a vital variable of financial markets,stock liquidity has a significant impact on firm's innovation.However,the debate of whether stock liquidity has a stimulation effect or inhibiting effect on firm's innovation remains ambiguous among foreign researches.Meanwhile,few domestic literatures concentrate and make a comprehensive analysis about this topic.First of all,this paper analyzes the influence mechanism of stock liquidity on firm's innovation from the perspective of shareholders,management and institutional investors.Then,on the basis of theoretical analysis,using panel fixed effect model and PVAR model,this paper conducts empirical analyses based on the data of Chinese financial listed enterprises.The results show that:(1)In the short term,an increase in liquidity would restrain the future innovation.While in the long term,an increase in liquidity would increase future innovation;(2)On the other hand,the increase in innovation will increase stock liquidity in the short term,but doesn't have significant effect in the long term;(3)In the short term,financing constraints have restrictions on innovation.Besides,there is no relevance between a firm's innovation and its date of establishment.Finally,summarizing the results of empirical analysis.This paper brings some enlightenments as below:(1)Firms should improve their information disclosure mechanism and reduce the adverse selection cost of investors;(2)Regulators should improve the liquidity of Chinese stock market,in order to encourage enterprise innovations in the long run;(3)The investment behaviors of institutional investors should be regulated,because institutional investors are double-edged sword for firm's innovation.(4)Long-term investors should put more value on firms whose stocks are more liquidity traded.Under the background of “popular entrepreneurship and innovation”,our results are consultative for investors,firm managers and regulators.