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Innovate or die: Corporate innovation and bankruptcy forecasts

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  • Bai, Qing
  • Tian, Shaonan

Abstract

We investigate the relationship between a firm’s innovation performance and its probability of bankruptcy. Estimating the discrete hazard model with a comprehensive set of bankruptcies spanning the period of 1980–2009, we find several previously neglected innovation-based variables are important determinants of bankruptcy probability, especially for firms belonging to technology-intensive industries. R&D productivity demonstrates persistent significance across different prediction horizons while the predictive power of patent count becomes larger and more significant at longer prediction horizons. We also find that a firm’s organization capital intensity correlates positively with future bankruptcy.

Suggested Citation

  • Bai, Qing & Tian, Shaonan, 2020. "Innovate or die: Corporate innovation and bankruptcy forecasts," Journal of Empirical Finance, Elsevier, vol. 59(C), pages 88-108.
    • Handle: RePEc:eee:empfin:v:59:y:2020:i:c:p:88-108
    DOI: 10.1016/j.jempfin.2020.09.002
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    More about this item

    Keywords

    Corporate bankruptcy; Discrete hazard model; Innovation; Patent;
    All these keywords.

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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