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| A Research on the Effect and Mechanism of Capital Market Pricing Efficiency on Corporate R&D |
| HUANG Zhihong，YANG Ruoming，WANG Caiping，LI Shanmin |
| 1. Tsinghua University, Beijing, China; 2. Sun Yat-sen University, Guangzhou, China |
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Abstract Using a sample of Chinese A-share listed firms from 2008~2019, this study investigates the impact of capital market pricing efficiency on firms’ innovation inputs and the mechanism of action. It is found that for each standard deviation increase in capital market pricing efficiency, firms’ innovation investment intensity increases by 8%. Capital market pricing efficiency enhances firms’ innovation investment through three mechanisms: helping firms to better identify investment opportunities, improving corporate governance and reducing financing constraints, specifically the above relationship is more pronounced among firms with higher investment opportunities, poorer corporate governance and higher financing constraints. Further research also finds that the promotion effect of capital market pricing efficiency on firms’ innovation activities is more pronounced in private firms, industries with a higher share of foreign capital, and regions with lower GDP growth pressure, suggesting that the capital market resource allocation function is more effective in environments with higher levels of marketization.
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Received: 05 April 2022
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