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The interaction effect of text-based corporate innovation and economic policy uncertainty on firm performance

By Nattarinee Denlertchaikul, Ph.D. Student, Sasin School of Management Associate Professor Pattanaporn Chatjuthamard, Ph.D. Advisor, Sasin School of Management Friday May 20, 2022, 12:00 -13:00 pm. Venue: Room 201, Sasin School of Management. Please register here to reserve your seat. Summary: Several empirical evidences suggest that corporate innovation is positively associated with firm performance. Using U.S. firms from the period of 1996-2010, we show that, in time of economic policy uncertainty, firms with high text-based corporate innovation are likely to face a pronounced increase in cost of finance, which translated into lower firm value. Consistent with this argument, our results show that in times of greater uncertainty, it is more difficult to value corporation innovation. Therefore, the favorable effect of corporate innovation on firm value is reduced substantially. Several robustness checks confirm the results, including various instrumental-variable analyses. Our study is the first to shed light on how text-based corporate innovation is associated with firm performance under economic policy uncertainty. Finally, we use novel measure of text-based corporate innovation to measure firm’s quality and quantity of corporate innovation.   For more information please contact Khun Nanthapak Pinyo at 091 479 4551, 02 218 4036 or researchseminar@sasin.edu.