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Mutual fund activism and corporate innovation: Evidence from China

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  • Bingrun Xu
  • Wenli Huang
  • Lu Li
  • Lei Lu

Abstract

This paper examines whether and how mutual fund activism affects corporate innovation. Using a patent‐based innovation dataset from 2006 to 2017, our finding, which is inconsistent with the managerial myopia hypothesis, reveals that mutual fund intervention is associated with corporate innovation. We propose that mutual fund intervention promotes corporate innovation, proxied by invention patents. In addition, the effect of mutual fund intervention on corporate innovation is more pronounced for non‐state‐owned enterprises (non‐SOEs) than for state‐owned enterprises (SOEs), and that mutual fund intervention is likely to increase firms' portfolio R&D expenditures. Finally, we offer robustness checks and address possible endogeneity concerns.

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  • Bingrun Xu & Wenli Huang & Lu Li & Lei Lu, 2023. "Mutual fund activism and corporate innovation: Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S2), pages 2755-2779, June.
    • Handle: RePEc:bla:acctfi:v:63:y:2023:i:s2:p:2755-2779
    DOI: 10.1111/acfi.13057
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    1. Li, Lu & Li, Yang & He, Yuqian & Chen, Yishu, 2023. "Hedge fund ownership and the innovation of high-tech firms: Evidence from the Science and technology innovation board in China," Economics Letters, Elsevier, vol. 233(C).

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