Economics at your fingertips  

Do innovation-intensive firms mitigate their valuation uncertainty during bad times?

Ilayda Nemlioglu and Sushanta Mallick ()

Journal of Economic Behavior & Organization, 2020, vol. 177, issue C, 913-940

Abstract: In times of crisis, innovation and entrepreneurship can be considered as a path out of valuation uncertainty of firms. All types of innovation output, however, may not have a similar impact across different firm size and sectors during bad times. Specifically, financially less-constrained (high leverage) innovative firms could be valued higher or experience less uncertainty in their performance. By considering the innovation intensity and leverage in pre- and post-2008 financial crisis periods, and using firm-level quarterly data from listed firms in the UK during 2000–2014, we find that leveraged firms can achieve greater valuation and mitigate any valuation uncertainty in the post-crisis period if they are knowledge- or high-technology intensive. In terms of size effect, although leverage distorts market valuation of large UK firms, the impact is positive for SMEs that are innovation intensive. Finally, in terms of sectoral effect, firms within manufacturing and services with leverage have benefitted from R&D and patenting activities during the post-crisis period, but not in the pre-crisis period. This also gets revealed when we classify all firms into high-tech and low-tech sectors, implying that firms in the high-tech sectors with debt dependence have benefitted favorably in terms of higher valuation and lower uncertainty in the post-crisis period, not firms in the low-technology sectors, reflecting further the role of technological intensity in firm valuation.

Keywords: Tobin's Q; Leverage; R&D intensity; Patents; Trademarks; Advertising; Innovation; Panel data models (search for similar items in EconPapers)
JEL-codes: C33 G01 G19 G32 O3 O32 O34 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.jebo.2020.06.004

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2021-10-13
Handle: RePEc:eee:jeborg:v:177:y:2020:i:c:p:913-940