Market Value of Innovation: An Empirical Analysis on China's Stock Market

Abstract

Abstract Studies on market value of innovation investment have been based on US and European database. However, few re-searchers investigate Chinese stock market about the market value of firm's expected R&D performance. In this paper, we use constructed panel dataset from three representative stock markets in China: Main Board Market, Small and Media-sized Enterprise Board Market and Growth Enterprise Market and then use intangible assets increment as innovation indicator to examine the innovation investment-firm performance association in both manufacturing and service industries by a dataset over an 11-year period covering 1455 firms to evaluate the differences in their relative contribution to market performance. By comparing the results of these three stock markets, we find out the effect of R&D investment and increasing R&D input to market value is insignificant in all three stock markets, resulting from the weak protection for minority investors and loose regulation of information disclosure. Different constructions of intangible assets of listed firms on MBM and GEM account for market's relatively low efficiency to reflect real value of R&D investment. On industry-level, we conclude that R&D investment in both service and manufacturing sector contributes positively to market performance of firms and R&D investment in service industry shows stronger and more significant linkage to market value than manufacturing industry.