Product Market Competition, R&D Investment And Stock Returns

After more than 30 years of development,the stock market system and pattern of China are more perfect,and the market environment with Chinese characteristic were formed.For listed companies,the stock market is closely related to its business investment activity,especially in recent years,because of the strong support of the state for innovation,the research about R&D investment and stock performance has attracted more and more scholars' attention.In addition,by the reason of gradually fierce competition in the market,the relationship between stock returns and market environment that enterprises are facing should not be ignored.Market competition will generate competition premium,but also can prevent the monopoly profits,the relationship between competition and returns is not clear.At the same time,enterprise operation,external environment and stock market is a unified whole,therefore,the investment decisions of listed companies and the industry environment are closely related to stock returns,but at present,there is still a lack of research in the area that study the relationship between and among product market competition,R&D investment and stock returns.Based on the Chinese A-share listed companies and the relevant date during 2010-2016,by built portfolios and conduct a panel date regression,this paper gave evidence from the portfolio level and individual stock level,the research about the relationship among product market competition,R&D investment and stock returns has expand the literature that pay close attention to the industry environments,enterprise innovation and stock market.The result shows that for Chinese market,in general,product market competition is negatively related to the stock returns,comparatively speaking,enterprise in monopoly industry will earn higher returns than competitive company.Besides,as the main source of enterprise innovation,R&D investment has a positive correlation with stock returns.At the same time,there is a positive interaction between R&D investment and monopoly,monopoly enterprise in the high R&D portfolio will not only obtain monopoly profit,but also could enjoy the innovation premium.Furthermore,considering that the level of financial constraints and nature of property rights of listed companies will affect the management decision making and profit level,therefore,this paper gave further discussion of the above contents based on financing constraints and nature of property right subsamples,the main conclusions have not changed.But it is worth noting that for the subsample own high financial constraints level,the role of R&D investment will play better,and the positive interaction effect between R&D and monopoly will also be more pronounced;at the same time,for the Chinese listed companies,the state-owned enterprises in the high concentration industry will earn higher monopoly profits than the non-stated-owned enterprises due to its own monopoly advantage.In general,we discussed the relationship among R&D innovation,competition and stock performance,and put forward a general conclusion that applicable to China market,not only extend the former literatures,but also could provide constructive proposals for the enterprise's decision making,investors' investment and government's policy setting.