Absorptive capacity, technology spillovers, and the cross-section of stock returns
Journal of Banking & Finance, 2017, vol. 85, issue C, 146-164
In the presence of potential technology spillovers, I demonstrate that a firm's absorptive capacity (AC), as proxied by R&D investments, is crucial to benefit from spillovers. I find that higher AC firms, when exposed to large potential spillovers, exhibit stronger future real outcomes (cite-weighted patents and operating performance) and market value. Importantly, however, this value-relevant information does not appear to be immediately incorporated into stock prices, leading to high future abnormal stock returns for firms with high AC and spillover exposure. Furthermore, the undervaluation is most pronounced among low investor attention stocks, suggesting that limited attention contributes to the undervaluation.
Keywords: Spillover; Innovation; R&D; Limited attention; Market efficiency (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 O31 O32 O33 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:85:y:2017:i:c:p:146-164
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