R&D innovation indicator and its effects on the market. An empirical assessment from a financial perspective

Abstract

We propose an alternative firm-level measure for innovation activities-R&D elasticity-and we analyse its effects on the Tobin's Q of listed companies on the Euronext 100 Index. We find that R&D elasticity is positively related to market appreciation by stakeholder investors. Moreover, we analyse the role of default risk in the relationship between innovation activities and market value, and find that firms' default probabilities are negatively related to Tobin's Q. These findings are supported by OLS regressions, wherein Tobin's Q is regressed on R&D elasticity, five-year default probability, and controls such as ESG voluntary disclosure. These results further the research aimed at developing a conceptual framework for integrating at a policy level the R&D elasticity indicator as a type of innovation disclosure among the non-financial disclosures released by companies.

The Interaction Effect between ESG and Green Innovation and Its Impact on Firm Value from the Perspective of Information Disclosure

“…This is also different from the conclusions of existing research. Previous studies on innovation and social responsibility have only concluded that these two factors have a substitution effect on each other [6,7]. However, this study found that green innovation only has a substitution effect on social information disclosure, and this effect gradually decreases with the increase of firm value.…”

“…Similarly, Coluccia et al (2019) found that there is a substitution effect occurring between investment in R&D and ESG scores. Investment in R&D can improve enterprise performance, while the ESG score has no significant impact on enterprise performance, so enterprises should disclose a greater amount of relevant R&D information to stakeholders [6].…”

“…If an enterprise invests too much money in social responsibility activities, its consumers will think that the enterprise overuses scientific research funds, that the product quality is not guaranteed, or that the enterprise's performance will be reduced [7,35]. Similarly, Coluccia et al (2019) found that there is a substitution effect occurring between investment in R&D and ESG scores. Investment in R&D can improve enterprise performance, while the ESG score has no significant impact on enterprise performance, so enterprises should disclose a greater amount of relevant R&D information to stakeholders [6].…”

“…To eliminate bias caused by the unobservable heterogeneity of enterprises, a series of control variables were added to ensure the accuracy of the results. Representing the profitability of enterprises with return on equity (roe); representing the short-term solvency of enterprises with a liquidity ratio (lr); representing the leverage ratio of enterprises with an asset-liability ratio (lev) and cash asset ratio (flow) [6,10,29]; representing the equity concentration of enterprises with ten major equity concentration ratios (topten), and observing and studying the internal decision-making level of enterprises [27]. Besides, considering that enterprise scale, age, and nature will affect the firm value [18,27], representing the enterprise scale with the logarithm of enterprise assets (size), and representing the business period (age) with the result of the years minus the date of establishment.…”

“…Although many previous studies have found that general innovation and social responsibility have the interaction effect [2,3] of complementing [4,5] or replacing [6,7] firm value, there is still a lack of research on the interaction between green innovation and social responsibility on firm value. From the perspective of information disclosure, this paper examines the interaction effect of social responsibility, which is divided into the three dimensions of environment, society and governance, and green innovation on firm value.…”