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Stock liquidity resilience and firm breakthrough innovation

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  • Liu, Mingnian
  • Huang, Lin
  • Shen, Yu

Abstract

Innovation is a critical driving force in a firm's growth. In this paper, we study stock liquidity resilience's impact on firm breakthrough innovation in the Chinese market. Stock resilience describes a stock's ability to withstand a shock and how quickly it can recover from this shock. We measure stock resistance and recovery capabilities using Inclán and Tiao's (1994) ICSS algorithm and construct a liquidity resilience variable for each stock. The empirical analyses demonstrate that a stock's liquidity resilience can increase firm breakthrough innovation significantly. This effect is pronounced for firms in technology-intensive industries and big firms. The mechanism analyses indicate that resilience can increase firm breakthrough innovation through fund, talent, and management confidence channels. (JEL G14, O32).

Suggested Citation

  • Liu, Mingnian & Huang, Lin & Shen, Yu, 2026. "Stock liquidity resilience and firm breakthrough innovation," Pacific-Basin Finance Journal, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:pacfin:v:98:y:2026:i:c:s0927538x26000934
    DOI: 10.1016/j.pacfin.2026.103147
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    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • 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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