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Real Asset Liquidity and Firm Innovation
Keywords: 5 words maximum
real asset liquidity, innovation, cost of capital, cost of equity, operating flexibility
Very short description for use in the program to help attendees understand more than a title can describe
This paper examines the effects of real asset liquidity on firm innovation. We show that firms with high liquid assets tend to invest more in research and development (R&D) and generate higher number of patents and patent citations. We further document that this effect is more pronounced among firms with less capacity to access external equity capital as well as for those with high cost of asset replacement. Overall, our findings are consistent with the hypothesis that high real asset liquidity decreases both costs of external capital and of asset replacement, encouraging firms to invest more in innovation.
Lead & Corresponding Author
Lai Van Vo, PhD, Western Connecticut State University
Job Title
Assistant Professor of Finance