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Initial public offering, corporate innovation and total factor productivity: Evidence from China

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  • Yizhong Wang
  • Linying Lv
  • Shanqiao Xia

Abstract

We study how listing status affects corporate innovation and total factor productivity (TFP) in the Chinese capital market. Using a new data set of R&D investment and patent information on both industrial unlisted and listed firms, the following empirical findings are obtained: (i) firms experience an increase in innovation input and a decrease in innovation output following the initial public offering (IPO); and (ii) the decrease in innovation output significantly impedes TFP. We identify two possible mechanisms through which IPOs affect innovation activities: agency problems and easier access to funding. The results are robust to the propensity score‐matching approach that addresses selection bias. The analysis reveals that firms face a trade‐off between financing advantages and a potential decrease in innovation and productivity during the transition to public equity markets.

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  • Yizhong Wang & Linying Lv & Shanqiao Xia, 2022. "Initial public offering, corporate innovation and total factor productivity: Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(5), pages 4695-4726, December.
    • Handle: RePEc:bla:acctfi:v:62:y:2022:i:5:p:4695-4726
    DOI: 10.1111/acfi.12974
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    1. Siyi Deng & Jie He, 2024. "Managerial inclusiveness and corporate innovation in China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(1), pages 381-410, March.

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