Innovation Investment、Corporate Risk And Stock Returns

With the implementation of the “Innovation-Driven Development Strategy”,while innovation activities have improves China’s total factor productivity and promotes China to move up to global value chain,there are many hidden risks behind it.Can innovation investment be effectively transformed into innovation product and promote the development of corporate stock price is worthy of attention.Existing studies have explore the relationship between innovation investment and stock returns.However,there is little literature pay attention to the mechanism of innovation investment affecting stock returns.With regard to the topic of how innovation investment affects stock returns,only a few scholars have studied it and have not reached an agreement,the conclusions mainly include that innovation investment can promotes stock returns and innovation investment is irrelevance with stock returns.Most of the existing research focuses on the one-way impact of innovation investment on stock returns,they tend to discuss whether corporate innovation investment can increase stock returns or is not related to stock returns,and they haven’t explore the mechanism of the influence of innovation investment on stock returns.In view of the multistage nature of innovation activities and the diversity and transitivity of corporate risks,the paper studies the impact of innovation investment on stock returns from an empirical perspective,and further examines the mechanism behind it.the paper explores the role of corporate risk in the relationship between the two,which may have important theoretical value and practical significance.Based on resource-based theory,principal-agent theory,information asymmetry theory and signal transmission theory,this paper uses the relevant data of GEM listed companies in China,discusses the mechanism of innovation investment on business risk,information risk and market risk,and further explores the impact of factors such as the size of listed companies,the nature of the industry,the level of marketization in the region,the capitalization of R&D investment,investors focus,external market conditions and innovation capabilities,to further strengthen and improve the logical framework of this article.Finally,combines with the empirical research results,relevant policy recommendations are proposed in a targeted manner.Specifically,the research results of this paper mainly include the following four aspects:First,the level of innovation investment represents the willingness of listed companies to take risks in order to obtain high returns.Different innovationinvestment have different business risks.Excessively high innovation investment is accompanied by aggravation of financing constraints,principal-agent problems and bankruptcy risk,thus can result in increased business risk.While moderate innovation investment has greater flexibility and adjustment space,can increase the dynamic efficiency of innovation,thus will reduce the business risk.The empirical results show that there is a U-shaped nonlinear relationship between innovation investment and business risk.Compared with companies with moderate innovation investment,companies with high innovation investment have higher business risk.This paper also examines the adjustment effect of tax avoidance on the relationship between innovation investment and business risk,and find that tax avoidance can alleviate the impact of innovation investment on business risk,thus supporting the traditional tax avoidance theory.The paper also takes several further tests and finds that the impact of innovation investment on business risk is heterogeneous due to different driving factors,the impact of innovation investment on business risk and the adjustment effect of tax avoidance on the relationship between the two only exist in the larger group,the regulated industry group,the high-tech industry group and the eastern regional group.In addition,the paper also finds that innovation investment has intensified business risk by increasing corporate bankruptcy risk and agency cost,bankruptcy risk and agency cost play a mediating role in the path of innovation investment affecting business risk.Second,listed companies have more information on their own innovation capabilities,technological advantages,project prospects,etc.,but for the purpose of protecting technology secrets,listed companies tend to reduce the details of disclosure for innovative projects,and may even hide the potential risks of innovative projects or exaggerate the market prospects of innovative projects in order to obtain more external financing.If external investors want to screen high-quality companies with strong innovation,they need to pay out expensive information collection cost and identify costs.Therefore,innovation investment will lead to information asymmetry between listed companies and external investors,thus breeding information risks.The empirical results show that innovation investment leads to higher information risks.The paper also takes several further tests and finds that the innovation investment will not affect the innate information risk of the enterprise,but it will affect the discretional information risk of the enterprise.Exploring the regulatory role for capitalization of R&D investment,i find that capitalization of R&D investment conveys the favorable information of listed companies’ innovation success to themarket,which is helpful to reduce information risks.This paper also examines whether management layer has opportunistic behaviors that use capitalization of R&D investment and finds that management layer has the incentive to use capitalization of R&D investment to reduce holdings.The higher the capitalization rates of R&D investment,the stronger the motivation for reduction.The paper also find that the listed companies with higher audit input have relatively lower information risk caused by innovation investment;agency cost plays a mediating role in the impact of innovation investment on information risk,and listed companies with higher innovation investment increase agency cost through more information management,increases the agency cost,thus increases the information risk.Third,in view of the complexity of innovation activities and the information asymmetry between enterprises and external investors,as inferior parties to information,external investors are lack of information acquisition capabilities,in order to identify enterprises with real technological advantages,external investors have to put in a lot of time,effort and cost to gather information about innovative projects and to monitor the company’s innovation progress and innovation results.In order to avoid leakage of trade secrets,the information management behavior of listed companies increases the difficulty of identifying and making decisions for high-quality enterprises by external investors.External investors will demand higher risk premiums as compensation,which may aggravate the market risk faced by listed companies.In addition,the differentiated intangible assets created by listed companies through innovative investment can protect them from the market downturn and may weaken the market risks faced by listed companies.The paper also takes several further tests and finds that the stock price of the listed company is more likely to be overestimated when investors pay more attention to enterprises,the innovation ability of enterprises is weak and the bull market year is in,which leads to greater impact of the innovation investment on market risk.When grouping the enterprises according to their scale,industry characteristics and marketization process,the paper finds that the above relationship is only established in small enterprises,high-tech industries and areas with rapid marketization,indicating that innovation investment in enterprises with small scale,high-tech industries and high levels of marketization is more sensitive to market risk.Fourth,companies with lower innovation investment can devote more energy to creating value for stakeholders such as customers and investors,they can obtain higher stock returns by improving corporate performance;enterprises with mediuminnovation investment occupy part of resources due to innovation activities,which results in the reduction of resources for daily operations and other investment activities,and it is easy to cause confrontational behaviors of other competitors,resulting in lower corporate performance and stock returns;companies with higher innovation investment have higher risks,so investors will demand a higher risk premium,which will lead to higher stock returns.The empirical research finds that the impact of innovation investment on stock returns presents a U-shaped curve relationship,and the business risk plays a mediating role in the relationship between the two.The paper also find that the above relationship exists only in companies with weaker competition in the product market,companies with stronger innovation capabilities and bull market years,it suggests that when the product market is less competitive,the company has stronger innovation ability and is in the bull market stage,the innovation investment is more helpful to increase the company’s stock returns,which makes the impact of innovation investment on stock returns more obvious.When grouping the enterprises according to their size and industry characteristics,the paper finds that the above relationship is only established in large-scale companies and high-tech industries,indicating that large-scale companies and high-tech enterprises can bring higher stock returns.The research contributions of this paper are mainly reflected in the following aspects:First,although there is a small amount of literature focusing on the transmission effect of risk,the research on the mechanism of innovation risk-inducing enterprise risk transmission is rarely seen in the literature.This paper deeply analyzes the internal and external factors of corporate risk induced by innovation investment;it constructs endogenous mechanism model and transmission effect model of corporate risk induced by innovation investment from the perspective of the innovation value chain and risk effect chain,which provides a new framework for understanding enterprise risk and its transmission effect.Second,among the existing literature on the economic consequences of innovation,only a small number of scholars have explored the impact of innovation investment on stock returns,there is little literature to explore the mechanism behind the relationship between the two.In the small amount of research on the impact of innovation investment on stock returns,scholars mainly focus on the one-way promotion or inhibition of innovation investment on stock returns,and did not form a consistent conclusion.Based on the existing research,this paper discusses the impactof innovation investment on corporate stock returns,and examines the mediating role of corporate risk,and draws different conclusions with previous results,which will enrich the literature on economic consequences of innovation investment and stock returns.Third,although there are already a lot of scholars discussed about corporate risk,there are few classified studies on it,because different types of risks exist in all stages of enterprise innovation,and there is a transmission effect between risks.Based on the risk conduction process,this paper explores the relationship between innovation investment and business risk,information risk and market risk from the enterprise operation level and external network level,as well as the intermediary effect of business risk,information risk and market risk in the relationship between innovation investment and stock returns,which will enrich the literature on corporate risk.Fourth,most of the previous literature on the impact of tax avoidance on enterprises is based on the framework of principal-agent theory;few literature examine the impact of tax avoidance on business risk.By studying the moderating effect of tax avoidance on the relationship between innovation investment and business risk,this paper finds that tax avoidance can weaken business risks,forming a different conclusion from the principal-agent framework,thus can enrich the literature on tax avoidance and business risk.Fifth,unlike the previous literature on the linear relationship between innovation investment and stock returns and the impact of product market competition on the relationship between the two,this paper explores the positive role boundary of innovation investment affecting stock returns and the regulatory role of product market competition.It finds that the impact of innovation investment on stock returns is more significant when the product market competition is weak.It draws a conclusion that is different from the predecessors,and expands the research on market competition and stock returns,which helps to fully understand the innovation activities of enterprises for the government.The impact of this paper provides empirical evidence for the government to guide and promote enterprises to increase innovation investment rationally,so that innovation activities can better serve the transformation and upgrading of China’s industrial structure.Therefore,the research conclusions of this paper have strong practical significance.